Nigeria's federal budget begins long before ministries start spending money.
Before government can decide how much to allocate to roads, education, security, healthcare or debt service, economists must first answer several uncertain questions.
What will crude oil sell for?
How much oil will Nigeria actually produce?
Where will the naira trade against the dollar?
How high will inflation be?
How much tax and other non-oil revenue will government collect?
These are called macroeconomic assumptions.
They may look like technical numbers buried inside budget documents, but almost everything in the budget depends on them.
That is why a decision taken by the Federal Government this week deserves much more attention than it has received.
Nigeria's Economic Management Team has approved an inter-agency committee to develop a single harmonised set of economic assumptions for fiscal and monetary authorities after a government review found that different agencies had sometimes been working with inconsistent projections.
According to the Federal Ministry of Finance, differences involving crude oil prices, oil production, exchange rates, inflation and non-oil revenue were among the factors contributing to budget underperformance.
In plain language, parts of the Nigerian government have not always been planning from exactly the same economic picture.
That creates consequences far beyond spreadsheets.
A Budget Is Really a Forecast Before It Becomes a Spending Plan
Imagine a household expecting to earn ₦1 million every month.
The family commits to a mortgage, school fees, transportation, food and other expenses based on that expectation.
But suppose the ₦1 million income was built on assumptions that prove unrealistic and actual monthly income turns out to be ₦650,000.
Something has to change.
The family must cut spending, borrow, delay payments or use savings.
Government faces the same basic problem, only with trillions of naira.
Nigeria's 2026 budget proposal, for example, was initially built around assumptions including an oil benchmark of $64.85 per barrel, crude production of 1.84 million barrels per day and an average exchange rate of ₦1,400 to the dollar.
If actual oil production falls far below the assumed level, expected petroleum revenue suffers.
If the exchange rate differs substantially from the assumption, naira values of foreign revenues, debt payments and imported government inputs change.
If inflation is higher than projected, the purchasing power of budget allocations falls.
If non-oil revenue fails to materialise, government either spends less than planned or finds additional financing.
The accuracy of these assumptions therefore affects whether a budget is credible from the beginning.
Nigeria Has Already Seen What Happens When Assumptions Miss Reality
The government's current concern is not theoretical.
Nigeria's 2025 budget performance showed significant gaps between expectations and actual outcomes.
When President Bola Tinubu presented the 2026 budget proposal in December 2025, he disclosed that by the third quarter of 2025, federal revenue stood at about ₦18.6 trillion, or 61 per cent of target, while expenditure was about ₦24.66 trillion, representing 60 per cent of target.
More strikingly, only about ₦3.10 trillion, or 17.7 per cent of the 2025 capital budget, had been released by that stage, partly because government was still completing projects under the extended 2024 capital budget.
A National Institute for Legislative and Democratic Studies review went further, reporting that none of the major 2025 budget benchmark assumptions had been fully achieved. The 2025 plan had assumed crude production of 2.06 million barrels per day, oil at $75 per barrel, 4.6 per cent GDP growth, 15 per cent inflation and an exchange rate of ₦1,500 to the dollar.
Not every budget shortfall can be blamed on forecasting.
Security problems, project delays, procurement failures, revenue leakages, administrative weaknesses and political decisions can all affect implementation.
But unrealistic or inconsistent assumptions make an already difficult job harder.
Different Exchange-Rate Assumptions Show Why Coordination Matters
Nigeria's recent budget process provides a useful illustration of how figures can change during planning.
The House of Representatives approved the 2026–2028 Medium-Term Expenditure Framework with an exchange-rate projection of approximately ₦1,512 to the dollar for 2026.
Two days later, President Tinubu's 2026 budget presentation used an average exchange-rate assumption of ₦1,400 to the dollar.
This does not by itself prove that either figure was wrong. Economic assumptions are revised as circumstances and policy decisions change.
But it illustrates the broader problem.
Which number should revenue agencies use?
Which figure should debt managers use?
What should ministries use when costing imported equipment?
What should investors regard as government's baseline expectation?
When different arms of government work from different assumptions without clear reconciliation, planning becomes less coherent.
Oil Production May Be the Most Important Assumption
Few assumptions affect Nigeria's federal finances as strongly as crude production.
Government can choose a conservative oil-price benchmark, but it cannot receive revenue from oil that is never produced.
Nigeria's 2026 fiscal plan assumed production of 1.84 million barrels per day.
Actual crude production has improved during 2026, but production performance remains vulnerable to theft, pipeline problems, maintenance, investment delays and operational disruption.
This matters because oil production affects more than federal revenue.
It also influences foreign-exchange supply.
Lower production can mean fewer export dollars entering the economy, which can put additional pressure on the naira.
That pressure can then affect inflation and government expenditure.
One wrong assumption can therefore move through several parts of the budget.
Inflation Can Quietly Shrink a Budget
Suppose government allocates ₦100 billion to construct infrastructure.
If inflation turns out much higher than expected, the same ₦100 billion may buy significantly less cement, steel, fuel, machinery and labour by the time the project is implemented.
The allocation has not changed.
Its real value has.
This is why inflation assumptions matter enormously for capital projects.
Nigeria's 2026 budget process has itself contained different inflation projections at different stages. National Assembly consideration of the Medium-Term Expenditure Framework endorsed a 2026 inflation projection of about 16.5 per cent, while subsequent budget analysis referenced a 14.45 per cent benchmark.
Again, changing forecasts are not inherently evidence of incompetence.
Forecasts should change when evidence changes.
The problem arises when agencies are simultaneously using different assumptions without a disciplined process for reconciling them.
Revenue Forecasting May Be Even More Important Than Spending Plans
Nigeria's annual budget debate often concentrates on expenditure.
How much goes to defence?
Education?
Health?
Infrastructure?
But expenditure promises are only credible when revenue exists to finance them.
The original 2026 budget proposal projected total federal revenue of about ₦34.33 trillion against expenditure of ₦58.18 trillion, leaving a substantial financing gap.
That makes accurate revenue forecasting essential.
If government overestimates oil revenue, taxes, customs collections or revenue from government-owned enterprises, it may have to borrow more, reduce releases or postpone projects.
This is one reason Nigerians frequently encounter the strange phenomenon of projects being included in budgets but not actually completed.
An appropriation is permission to spend.
It is not proof that cash will become available.
The New Committee Is Trying to Create One Government Economic Baseline
The Economic Management Team now wants to reduce these inconsistencies.
The proposed inter-agency committee will harmonise assumptions covering crude prices, production, exchange rates, inflation and non-oil revenue.
Government also says it wants to standardise how major economic indicators are reported internally and communicated to investors, development partners and the public.
The Economic Management Team will now meet monthly, while the Ministry of Finance has been assigned a coordinating role for national economic data, with agencies retaining responsibility for their underlying datasets.
Finance Minister and Coordinating Minister of the Economy Taiwo Oyedele summarised the objective as creating fewer surprises in the budget and more credible planning.
That is sensible.
But harmonisation must not become another word for forcing independent institutions to produce politically convenient numbers.
One Forecast Does Not Mean Everybody Must Pretend to Agree
There is an important distinction between coordination and manufactured consensus.
The Central Bank may have one view of inflation.
The Finance Ministry may have another.
Oil regulators may produce different production scenarios.
Independent analysts may reach still different conclusions.
Disagreement can be healthy.
Economic forecasting is inherently uncertain.
The objective should therefore not be to suppress alternative forecasts.
Government needs a transparent official planning baseline, together with clear explanations of how the assumptions were reached and how sensitive the budget is to different outcomes.
For example, a stronger fiscal framework could show Nigerians:
What happens if oil averages $55 rather than $65?
What happens if production reaches only 1.6 million barrels per day?
What happens if inflation is three percentage points above forecast?
What happens if non-oil revenue falls 10 per cent below target?
That is called scenario or sensitivity analysis.
It gives policymakers a plan before conditions deteriorate.
The Budget Needs Fewer Surprises, Not Better-Looking Forecasts
The danger in government forecasting is always optimism.
Higher projected oil production produces more expected revenue on paper.
Higher economic growth generates stronger revenue assumptions.
Lower projected inflation makes spending plans look more powerful.
But optimistic forecasts do not create real money.
They can instead produce a budget that looks impressive when presented but becomes increasingly difficult to execute.
Nigeria therefore needs to judge budget quality partly by the realism of the assumptions underneath it.
A smaller budget built on achievable revenue may be more useful than a huge budget that ministries cannot actually implement.
Nigerians Should Be Able to Track Assumption Versus Reality
The government's new committee will matter only if the public can eventually see the results.
Nigeria should publish a simple quarterly macro-fiscal dashboard comparing:
Budget assumption → actual outcome → effect on revenue → required adjustment.
For oil production, exchange rates, inflation, GDP growth and major revenue categories, citizens should be able to see where reality differs from the plan.
Such a dashboard would also help the National Assembly conduct better oversight.
More importantly, it would move Nigeria's budget conversation away from celebrating how many trillions were approved towards asking how much of the plan was realistically financed and delivered.
This Technical Reform Could Have Very Practical Consequences
Most Nigerians will never attend a budget retreat or examine a Medium-Term Expenditure Framework.
But they experience the consequences when economic planning fails.
A road is delayed.
A hospital allocation is not released.
A contractor abandons a project.
Government borrows more than expected.
Debt-service costs increase.
A ministry discovers that its allocation can no longer purchase what it was designed to buy.
These outcomes begin partly with the quality of fiscal planning.
The Federal Government is therefore right to recognise that its economic assumptions need stronger coordination.
The harder task begins now.
Nigeria does not merely need every government agency using the same numbers.
It needs them using credible numbers, updating those numbers transparently when circumstances change, planning for alternative scenarios and connecting forecasts to actual budget implementation.
A national budget is ultimately a promise built on assumptions.
The more realistic the assumptions, the more credible the promise.
Principal Sources
- Federal Government Economic Management Team decision establishing an inter-agency committee to harmonise macroeconomic assumptions, September 2026.
- President Tinubu's 2026 Budget Speech, including revenue, expenditure, deficit and underlying oil, production and exchange-rate assumptions.
- National Assembly consideration of the 2026–2028 Medium-Term Expenditure Framework and its oil, exchange-rate, inflation and growth assumptions.
- National Institute for Legislative and Democratic Studies assessment of 2025 budget benchmark performance and the 2026 fiscal framework.
- Budget Office of the Federation, 2026 Appropriation Act and fiscal-document repository.
A. Joshua Adedeji
A. Joshua Adedeji is a leadership strategist, organisational development consultant, author, teacher and values-driven transformation leader. He writes on leadership, strategy, governance, organisational effectiveness, business, personal development and Nigeria’s social and economic transformation, connecting ideas and current realities to practical implications for leaders, institutions, entrepreneurs and citizens. His work is shaped by a commitment to clear thinking, responsible leadership, stronger institutions and the development of people and systems capable of producing lasting impact.
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