N47.9 trillion 2025 Proposed Budget: An Analysis – Austin Okai
Wednesday 18th December 2024 marked the occasion of presentation of the 2025 Nigeria’s Proposed Budget of N47.9 trillion to the National Assembly by President Bola Ahmed Tinubu. Tagged Budget of Restoration: Securing Peace, Rebuilding Prosperity – it has a significant increase in nominal terms but a reduction in real value.
There are some key takeaways from the budget. For starters, government targets an economic growth rate of 3.46% in Q3 2024, a trade surplus of N5.8 trillion and foreign reserves of $42 billion as signs of recovery. Next, while inflation is projected to drop from 34.6% to 15% in 2025, the budget prioritizes critical sectors. For instance, Defence and Security has an allocation of N4.91 trillion with Infrastructure to gulp N4.06 trillion. Education has N3.52 trillion, leaving Health picking up N2.48 trillion.
Compared to its predecessor’s N35.5 trillion of 2024, the 2025 budget has a significant increase of 35%. The budget focuses on economic growth, fiscal stability and strategic reforms – including new borrowings. Others are capital expenditure and oil price benchmarks. The proposal includes the 2025-2027 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) presented to the National Assembly as a key step in advancing Nigeria’s economic reforms and fiscal management.
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In his budget breakdown, Minister of Budget & Economic Planning, Atiku Bagudu, emphasized a budget deficit funded by new borrowings of N9.2trillion, representing 3.87% of the projected GDP. The MTEF forecasts a 4.6% growth rate for Nigeria’s GDP alongside an oil price benchmark of $75 per barrel, oil production targets of 2.06 million barrels per day and an exchange rate of N1,400 to the dollar.
Just as it is earmarking N1.37tn for statutory transfers, alongside a sinking fund of N243.66bn – the government is to borrow $2.2bn amid N8.25tn debt service and is to set up N250bn mortgage finance at 12% for 20 years.
In analyzing the 2025 Appropriation Bill – BudgIT, a civic-tech entity has raised concerns over alleged omissions and irregularities in the 2025 budget. In a statement last Thursday, the organization pointed out the absence of budget breakdown by a few key agencies. Querying allocation of N2.49 trillion to regional development commissions under personnel costs, the organization argues that the action obscures true nature of their operational expenses and undermines transparency and accountability.
“Also, we have observed that the 2025 proposed budget breakdown submitted to the National Assembly for review and approval and published on the Budget Office website omits the breakdown of some MDAs, commissions and councils such as the National Judicial Council (N341.63bn) and TETFUND (N940.5bn),” BudgIT said.
Can this budget address Nigeria’s economic hardships? Parthian Partners – a leading Nigerian financial services provider established in 2012 and licensed by the Securities and Exchange Commission (SEC) – in an analysis maintained that beyond decline in real value of the budget, several key elements will determine if the appropriation bill can unlock Nigeria’s growth potentials.
First factor identified is revenue generation. Although government aims to generate over N30 trillion in revenue – underpinned by an oil price target of $75 per barrel and a production target of 2.06 million barrels per day (mbpd), the production target is viewed as overly optimistic.
Secondly, Parthian Partners maintain that government’s ability to manage its debts will be crucial in determining success of the budget. Other characteristics are effective execution, inflation and exchange rates as well as inclusive growth. It is noted that tackling the stated challenges should contribute to ensuring the budget’s ability to deliver meaningful growth.
Meanwhile, as the National Assembly is intensifying arrangements towards enacting the Appropriation Bill which has passed second reading into law, it would do well to exercise its budgetary powers responsibly. Members must ensure that resources are allocated efficiently and in line with national priorities.
Often times, the NASS modifies the Executive’s proposed budgets by inserting many projects and bloating the figures. Regrettably, these projects usually lack proper conceptualization and cost estimation. This time around, the NASS must check-mate inaccurate macroeconomic assumptions by government which have led to fiscal risks, budget financing challenges and growing public debt
