Financial experts warn that the free fall of Naira decked with inflation threaten the 2025 fiscal year because Federal Government might not be able to fund the 2025 budget. In their beliefs, the 2025 fiscal year is shaping up to be a challenging one for Nigeria. They insist that with the significant devaluation of the Naira, the Federal Government's capacity to fund the new budget is under severe threat. Despite a nominal increase of 74% in the budget, its real value has shrunk by 23% due to the Naira's depreciation. This financial strain is exacerbated by the Central Bank of Nigeria’s (CBN) struggling forex policy, which has failed to stabilize the currency over the past year.
The 2025 budget, proposed by President Bola Tinubu, amounts to N49.7 trillion. However, financial experts warn that this amount, under current economic conditions, will not achieve what the N28.777 trillion budget accomplished in 2024. The significant drop in the Naira's value has eroded the purchasing power of the budget, making it difficult for the government to provide essential goods and services.
In December 2023, the exchange rate was approximately N853 to $1. By December 2024, the rate had plummeted to around N1,700 to $1, according to President Tinubu's address to the National Assembly. The Nigerian Foreign Exchange Market (NFEM) reported an exchange rate of N1,536.93 to $1 on the CBN’s website as of December 21. The government had initially set a target exchange rate of N800 to $1 in the 2024 budget, a goal that now seems far-fetched.
Inflation remains another critical issue. The Federal Government set an inflation target of 21% for 2024, but the current rate stands at 34.6%, according to the National Bureau of Statistics (NBS). President Tinubu aims to reduce this rate to 15% in 2025, but achieving this target will be a formidable task given the current economic climate.
The CBN's monetary policy has focused on combating inflation by maintaining high interest rates. However, this approach has not tamed the inflation monster, which continues to rise. The depreciation of the Naira has also contributed to higher import costs, further fueling inflation.
The 2025 budget is built on several key assumptions and parameters:
An oil price benchmark of $75 per barrel Daily oil production of 2.06 million barrels per day (mbpd) An exchange rate of N1,500 per US dollar An inflation rate of 15%
The proposed expenditure is N49.7 trillion, with a total retained revenue of N34.82 trillion, resulting in a fiscal deficit of N13.08 trillion. The budget allocations focus on several critical areas:
Defense and Security: N4.91 trillion Infrastructure: N4.06 trillion Health: N2.48 trillion Education: N3.52 trillion Debt servicing: N15.81 trillion Other expenditures: N17.12 trillion Comparison with the 2024 Budget
The 2024 budget, titled "Budget of Renewed Hope," had a total expenditure of N27.5 trillion ($36.7 billion) and projected revenue of N18.32 trillion ($24.4 billion), with a deficit of N9.18 trillion ($12.2 billion). The revenue estimates included N7.68 trillion from oil, N4.07 trillion from government-owned enterprises, N3.52 trillion from non-oil taxes, N1.91 trillion from independent revenue, N4.55 billion from minerals and mining, and N1.13 trillion from other sources.
Non-debt recurrent expenditure: N9.92 trillion Capital expenditure: N7.72 trillion Debt service: N8.25 trillion Statutory transfer: N1.37 trillion Sinking fund: N243.66 billion Economic Performance and Achievements
President Tinubu highlighted several achievements during the budget presentation. The economy grew by 3.46% in the third quarter of 2024, up from 2.54% in the same period in 2023. Foreign reserves increased to nearly $42 billion, providing a robust buffer against external shocks. The trade surplus stood at 5.8 trillion naira, reflecting rising exports.
The President also noted that the 2024 budget saw remarkable milestones, with N14.55 trillion in revenue realized by the third quarter, representing 75% of the target. Expenditures amounted to N21.60 trillion, 85% of the year’s target.
The Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, echoed these sentiments, stating that Nigeria now enjoys a current account surplus. Efforts by the CBN Governor, Mr. Olayemi Cardoso, to attract foreign portfolio investment and remittances from Nigerians abroad have been successful, contributing to a $10 billion increase in foreign reserves over the last year.
Despite these achievements, the government’s position remains precarious. The 2024 budget failed to meet the expectations of many Nigerians, particularly the youth, as evidenced by the high level of emigration, known locally as the "Japa" syndrome. The nation has lost many experts in critical fields, including medicine, ICT, engineering, banking, and government services, due to frustration and better opportunities abroad.
A significant example is a major tertiary medical institution in Abuja losing its entire team of laboratory scientists in the Trauma Unit to brain drain. This exodus of skilled professionals poses a serious challenge to the country's development.
The 2025 budget, dubbed the "Budget of Restoration: Securing Peace, Rebuilding Prosperity," aims to address these issues. However, the extent to which it can secure peace and rebuild prosperity remains to be seen. The government’s ability to manage inflation, stabilize the exchange rate, and boost economic growth will be crucial.
President Tinubu’s administration must also focus on creating a conducive environment for businesses to thrive. This includes tackling corruption, improving infrastructure, and ensuring a stable regulatory framework. The success of these initiatives will determine whether the 2025 budget can truly restore hope and prosperity to Nigeria.
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