President Bola Tinubu presented the 2025 national budget to a joint sitting of the National Assembly on Tuesday, three weeks after his officials announced that the government was planning to spend N47.9 trillion next year.
The budget is Nigeria’s biggest ever in naira terms. For comparison, the budget for 2023 was N28.8 trillion while that of 2020 was N10.3 trillion. Both were record-breaking.
The projected revenue is N34.82 trillion, with N15.81 trillion assigned for debt repayment.
President Tinubu said his prior areas are defence, which will receive N4.91 trillion; infrastructure, N4.06 trillion; health, N2.48 trillion; and education, N3.52 trillion.
This means the government will spend N14.97 trillion or 31% of total expenditure on human capital, security and infrastructure.
On Thursday, the Senate sped the budget plan through the second reading. But there are concerns with the Tinubu government’s second full-year spending plan.
Naira
A glaring concern is its proposed naira exchange rate to the dollar. It is important because Nigeria’s main source of revenue is crude oil and gas, sold in dollars. The government needs to have a projection of how much it will make in dollars to plan how to spend.
The first concern with the budget’s exchange rate of N1500 to a dollar is that this figure is higher than N1400 announced in November by the finance and budget ministers – ahead of the president’s formal presentation of the budget.
The Nigerian currency has seen its worst performance in decades this year, after the Central Bank of Nigeria eased controls last year, allowing the naira to float, with its value determined by daily demand and supply. As many experts argue, currency float is more admirable in theory especially for Nigeria that exports not nearly as much as it imports.
Mr Tinubu met the naira at N464 to a dollar in May 2023; on Thursday, the closing rate was N1541 to the dollar at the official market. It passed N1700 weeks back. A N1500 exchange rate implies the government will have more naira for each barrel of oil it sells in dollars, money it needs to finance the budget. But its projection guides the markets and may not help an economy, well battered this year.
“That exchange rate is to tell Nigerians that ‘there is nothing we plan to do that will bring the exchange rate lower,’ because Nigerians are still thinking that probably that rate can come lower than N1500, maybe up to 1000, so there is a problem,” said Chijioke Ekechukwu, former director-general of Abuja Chamber of Commerce and Industry, who spoke to Channels Television.
“There’s a problem, you know, with that projection, because you are dumping our hopes of a reduction in the exchange rate.”
This is more concerning as President Tinubu and the central bank have reported a rise in foreign exchange reserves. In his budget address, the president cited reduced petroleum and food imports, increased exports of crude and refined petroleum products, increased foreign portfolio investment, and reduced upstream oil and gas production costs as factors that will boost dollar earnings next year.
So why is the naira projection down if more dollars are expected?
Debt and Deficit
At N15.81 trillion, debt servicing will take 33% of the budgeted expenditure. It will consume 45% of projected revenue. That’s huge. In simpler words, the government will spend a third of the budget total on paying old debt and nearly half of revenue it hopes to get from oil, tax and other sources, on debt repayment.
Hefty debt servicing squeezes spending on critical areas such as education, health, social security and infrastructure. National debt exploded under former President Muhammadu Buhari and Mr Tinubu has not done any better. Nigeria’s total public debt was N121 trillion in March 2023, two months before Mr Buhari’s exit, according to the Debt Management Office. By November 2024, it stood at N138 trillion.
Is the government really working to cut its debt? Well, not just yet. While paying off past obligations, the new budget along comes with its own burden. Mr Tinubu’s 2025 has a N13.08 trillion deficit – the spending not covered by revenue. That is 3.5% of gross domestic product, according to the president.
Spoons and waste
As Nigeria borrows to spend more yearly, its standard of living has barely improved. If anything, it has declined steadily. Poverty has worsened and hunger rates rocketed in the last two years, made worse by the removal of subsidies and devaluation of the naira. A key reason huge spendings do not reflect on Nigerians is what the government spends on.
It is a depressing reality of the nation’s budget that while other countries yearly prioritise healthcare, education and social security, sectors that touch more people, our state and federal governments fund the same recurring projects that gulp majority of annual budgets yet yield no results – frivolous items like vehicles, spoons and offices.
House of Representatives member, Mohammed El-Rufai (APC, Kaduna North), captured this well during a debate of the budget on Thursday.
“This recurrent issue is every budget even for a young person like myself. We budget for vehicles every year; we budget for utensils every year,” said Mr El-Rufai.
“So what I would like us to do to open more revenues or block loopholes is to look at all these agencies that are bringing their budgets. If they bought vehicles last year, please they should just relax now vehicles do not expire.
“These are the little things that unless we start looking at them, the loopholes we talk about will not come out.”
Inflation and oil projection
Two of the most ambitious projections of the budget are its inflation and oil production estimates. The government anticipates inflation will decline by over half, from 34.5% in November 2024 to 15% next year. Is that realistic? Mr Ekechukwu says, “No!”
“Fifteen percent with the kind of inflation rate, with the kind of petroleum product pricing we are having? So, you are going to first of all ask, ‘what are those things that are the drivers of the inflation rate?’ The two of them still remain high,” he said.
“So, what else is going to pull it down? There is a third one, insecurity. It’s still there. So what is that thing that is going to bring it down to 15% that we cannot see?
“And that’s why I said that one is almost not possible to achieve,” he declared.
Inflation has been the most punishing economic outcome of Mr Tinubu’s reforms. Millions struggle to feed daily and are in poverty as result after fuel prices rocketed. The government has done nearly nothing to help citizens even as it continues with its own frivolous spending. The new estimates may appear a reflection of that insensitivity.
The idea is that since annual inflation compares prices to the previous year, prices in 2025 are unlikely to rise as sharply as they did between 2024 and 2023. The government does not anticipate prices dropping but predicts that the rate of increase relative to 2024—which saw record-breaking inflation—will be less severe.
Discover more from Pluboard
Subscribe to get the latest posts sent to your email.