President Bola Tinubu last week presented the ‘ambitious but pragmatic’ 2025 budget of N49.7 trillion to the joint session of the National Assembly. The budget is based on the following projections: an oil benchmark of 2.06 million barrels per day, oil price of $75 per barrel, exchange rate of N1,500/$1 and average annual inflation rate of 15 per cent against the current 34.6 percent. The budget has a deficit of N13.08 trillion. This represents 27 per cent of the total expenditure and 3.89 per cent of the output. The government projects to earn N34.82 trillion in 2025 to fund the budget, while the remaining will be sourced through borrowing.
A breakdown of the budget shows that Defence and security got the lion share of N4.91 trillion, followed by infrastructure with an allocation of N4.06trillion. Health and Education got N2.48trillion and N3.52trillion, respectively. Agriculture got a paltry N827billion or 1.7 per cent of the budget. This, experts say, does not show government’s commitment to tackle food insecurity. Besides, the budget does not demonstrate that the government will in 2025 prioritise spending on key sectors that will enhance local production and lead to pricing moderation against the present escalating prices of essential goods.
Also, government has allocated N15.81 trillion to service debts. This is slightly higher than both debt and non-debt recurrence expenditure for 2024. There is no doubt that the budget on paper is ambitious, but it seems so short in practicality and feasibility that will guarantee the assumptions and goals enunciated in the budget. Debt servicing, salaries will gulp N24.8trillion in the 2025 budget. That in effect means that the implementation of the budget should be critically handled to avoid creating more challenges for the economy that is already in a tailspin.
For instance, the N15.8trillion for debt servicing outstrips that of security and education combined. This could further balloon the nation’s debt stock. This means that the government needs more creative ways to fund the budget rather than borrowing. There is need for prudent management of the nation’s resources. Government should apply fiscal measures that will ameliorate the economic hardship and rising cost of living. A critical appraisal of the budget shows that its expansionary nature conflicts with key monetary policies of the Central Bank of Nigeria (CBN). Contrary to government’s key projections, the budget may worsen inflationary pressure as well as exacerbate the economic hardship the citizens are going through.
The government must be realistic and strategic in its policy assumptions, especially in budgetary matters, which are the foundation of economic growth. For example, the current parallel market exchange rate is significantly higher than the projected N1,500/$. This discrepancy could lead to further devaluation of the naira, which is currently among the worst performing currencies in the world. Also, the oil benchmark price of $75 per barrel appears unrealistic considering the uncertainty in the global oil market. Above all, the N49.7trillion budget far exceeds the financial capacity of the federal government. The Debt Management Office (DMO) has repeatedly alluded to this fact. Government should do more in the area of revenue generation. In short, the size of the budget could trigger substantial fiscal deficit in the near future, if implementation of the budget is not properly monitored. Borrowing must be for production purposes, not for consumption, and such loans must be invested in critical sectors of the economy that should bridge the infrastructure gaps and reduce Nigeria’s over-reliance on oil revenue.
This is the time to intensify diversification of the economy through huge investment in non-oil sector, especially agriculture and manufacturing. With Nigeria’s debt profile of N134trillion, the government should muster the political will to revamp the economy. This entails prudent management of our resources and drastically reducing the cost of governance. Besides, government should address the poor inflow of foreign investments. Let there be improvement in our ease of doing business. Government must provide more incentives for foreign and local investors and curb the lingering insecurity. The forex crisis should equally be addressed. There is need for good economic policies, stable macroeconomic environment, better investment climate, genuine structural reforms, and enhanced human capital development, as well as commitment to reduce poverty. The government should improve the access to social security. Above all, we call for seamless implementation of the budget.