Experts are raising concerns about the feasibility of the federal government’s unprecedented N54.99 trillion budget for 2025, citing unrealistic revenue projections, rising debt levels and governance challenges as major obstacles to successful implementation.
Last Friday, President Tinubu signed the 2025 Appropriation Bill into law, which represents a significant increase from the initial proposal of N49.7 trillion. This budget also nearly doubles the previous year’s allocation of N27.5 trillion.
The budget themed “Budget of Restoration: Securing Peace, Rebuilding Prosperity” seeks to address national security, economic diversification, youth empowerment, education, healthcare, and infrastructure development.
Key budget allocations include statutory transfers of N3.65 trillion; recurrent (non- debt) expenditure of N13.64 trillion; capital expenditure, N23.96 trillion; debt servicing, N14.32 trillion; and fiscal deficit, projected to gulp N13.08 trillion, indicating 3.89 percent of GDP- still higher than the 3 percent threshold set by the Fiscal Responsibility Act (FRA), but lowest in recent years.
Before the passage and subsequent signing, the budget figure was raised twice – first, from N49.7 trillion to N54.2 trillion by the President himself, citing additional revenues anticipated from agencies like the Federal Inland Revenue Service, the Nigeria Customs Service (NCS), and other government-owned agencies.
But in aligning with the President’s request, and of course, yielding to pressure from various agencies for increased allocations, the NASS raised the budget to N54.99 trillion.
The detailed numbers as passed and signed are not yet in the public domain, and it is curious that the Ministry of Budget and National Planning and the Budget office have not released a comprehensive breakdown, unlike previous years when such information was readily available through media and stakeholder engagements.
Going by the president’s request to NASS, the solid mineral ministry will now get ₦1 trillion out of the extra revenue to support the government’s economic diversification efforts by unlocking Nigeria’s vast solid mineral resources.
Bank of Agriculture (BOA) will receive a significant boost with N1.5 trillion dedicated to its recapitalization, coming after serial failure by successive governments to revamp its operations and bolster Nigeria’s agricultural sector, especially through improved funding. Bank of Industry (BOI) will also receive some N500 billion for recapitalization.
The president also made a case for an additional N1.5 trillion for various infrastructure in the military, transportation, irrigation development, and border communities.
While passing the appropriation bill, the lawmakers allocated an additional N300bn to the health sector budget to address funding gaps created by the suspension of U.S. foreign aid for key health programs.
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Authorities say that the expanded budget is necessary in facilitating long-term growth and stability, particularly as the country seeks to fix poor infrastructure and diversify its revenue base away from oil, which remains volatile.
However, experts are worried about whether this ambitious spending can effectively stimulate growth amidst ongoing challenges like inflation and weak naira concerns, especially as the country remains import dependent.
Concerns also persist about the government’s ability to generate sufficient revenue to fund this record budget, as the country faces significant fiscal challenges.
With the fiscal deficit estimated at N13.08 trillion, the federal government, obviously, aims to generate a staggering N41.91 trillion in revenue to support this budget.
“The first thing that comes to mind on the 2025 budget is that it is extremely optimistic,” said Johnson Chukwu, Group Managing Director of Cowry Assets Management Limited.
“The revenue projection still looks unachievable. Last year, the government earned revenue in the region of N20 trillion. Now, it is expecting to grow that by 100 percent to N40 trillion, which is very optimistic,” Chukwu added.
Paul Alaje, a senior economist and partner at SPM Professionals, echoes Chukwu’s views, although he emphasizes that Nigeria requires significantly more than double its current planned expenditure to adequately address development needs.
“As an economy, we should not be doing less than $100 billion investment annually…But how do we get revenue to support this huge budget?”
Alaje highlighted that based on past experience, 2024 revenue increase was largely due to the naira devaluation, which allowed for more revenue inflows, particularly from export earnings, such as crude oil sales and other export-related revenues.
“But that may not be forever because our exchange rate corridor has become relatively stable as the CBN begins to intervene in the market by giving BDCs $25,000 weekly to abate scarcity.”
This, he explained, might see a relatively stable exchange rate environment, and would have implications for revenue projection.
Revenue agencies drive government appetite for more spending
Key to the government’s ambitious upward spending plan is a strong performance by the FIRS and NCS, which have exceeded revenue expectations recently.
The FIRS reported a record N21.6 trillion in revenue in 2024, driven basically by non-oil taxes.
The revenue is a 76 percent increase from N12.474 trillion generated in 2023.
It is also higher than the N19.4 trillion targeted; all tax types, outperformed previous year’s records.
In 2024, non-oil taxes exceeded targets by 28 percent, contributing 73.4 percent of total revenue. While non-oil taxes increased by 97 percent, oil taxes also went up by 35 percent.
Meanwhile, FIRS has set an ambitious N25.2 trillion target for 2025 and is confident of surpassing it.
The NCS reported over N6.105 trillion revenue in 2024, surpassing its N5.079 trillion target.
This was despite the N1.6 trillion concessions granted to support various sectors of the economy, and support growth in 2024.
The record, experts say, was largely driven by the weak naira, even though Adewale Adeniyi, Comptroller-General of Customs (CGC) disagreed, crediting the strong performance to strategic reforms, technology, partnerships, amongst other initiatives.
The NASS has set an ambitious N12 trillion revenue target for the NCS, almost double the N6.58 trillion earlier given by the government.
Despite this impressive performance, Chukwu insists that government revenue collections will likely fall short of projected targets, due to historical trends and ongoing fiscal challenges.
“There’s just a limit to the ability of revenue agencies to continue to grow revenue if there is no commensurate increase in economic activities,” he noted.
For Alaje, FIRS did extremely well in 2024, deploying new ideas. But, for government agencies like Customs, devaluation contributed significantly to their revenue increases.
This is because agencies with access to the fx-related income base benefited from naira devaluation, with their earnings translating to more naira on conversion.
Oil price may stay below $75/b oil benchmark
Another concern is that of the $75 per barrel oil benchmark and 2.06mbp output target for 2025 budget, raising another fiscal concern.
Recently, Heineken Lokpobiri, Minister of State for Petroleum Resources (Oil), expressed confidence that Nigeria will meet its oil production target, citing an increase to 1.8 million barrels per day in January.
He attributed the improvement to effective policy reforms and enhanced security in the oil-rich Niger Delta, which has led to significant new investments.
Read also: Debt, spending, and revenue: Nigerians react to ₦54.99 tn budget for 2025
But as of Monday, Brent crude price hovered around $73/barrel.
There are also fears that ongoing tariff wars, a ceasefire in the Russia-Ukraine war being pushed by President Trump, coupled with potential removal of sanctions on the Russian energy industry could lead to increased global oil supply, potentially lowering oil prices.
Analysts suggest that this scenario could see revenue shortfall, with a significant implication for the budget. This could then jeopardize fiscal sustainability and necessitate additional borrowing or spending cuts, and then affect Nigeria’s broader economic outlook, potentially impacting GDP growth and exchange rate stability.
According to Chukwu, “the budget estimates an oil benchmark of $75 per barrel, 2.06million barrels per day crude oil output and an exchange rate of N1,400/$. The government has projected to earn about N19.6 trillion from oil.
“The question is how is it going to grow crude production by over 30% within one year? I think that is very unrealistic.”
He noted that with current oil prices hovering around $75 per barrel and expected to decline further within the year, in line with global forecasts, meeting those oil targets remains far from reality. Based on these assumptions, you can see that the oil projection is unrealistic.”
Implications for inflation, debt and exchange rate
The 2025 budget remains the highest yet, in naira terms, designed to stimulate growth and development, but it also carries the risk of fueling inflation, if not managed carefully.
Inflation had been a persistent challenge for Nigeria, even though the headline rate for January 2025 moderated to 24.48 percent after CPI rebasing, from 34.80 percent in December 2024.
The government targets to cut inflation to 15 percent by the end of 2025—a goal that would require meticulous fiscal discipline and coordination with monetary policies.
The CBN has aimed to moderate inflationary pressures through tightening rates, however, the success of this strategy would depend on how effectively the government managed its spending.
Olayemi Cardoso, CBN governor has consistently raised concerns around expanding money supply, which fuels excess liquidity in the system, inflation, and exacerbates foreign exchange demand pressures.
Cardoso had lamented how the monthly Fiscal Accounts Allocation Committee (FAAC) disbursements which reached about N15 trillion to the three tiers of government in 2024 had substantial become source of money supply, creating high liquidity levels in the banking system, which in turn affect naira exchange rate.
For Chukwu, “If the budget implementation is not well-coordinated, the increased government expenditure could lead to higher demand for goods and services, driving up prices and exacerbating inflation.
“In any economy, where you have an expansionary budget, you should expect to have an inflationary impact. Nigeria’s case cannot be different.
“We should expect that the impact of this will partly be reflected in price levels, particularly if the funding is by Ways and Means.
“That will further exact pressure on not just inflationary price level, but also on the exchange rates.”
According to him, the primary concern is not the size of Nigeria’s annual budget, but whether the country’s economy has the absorptive capacity for such substantial expenditures.
“If revenue does not come, we will certainly expand our debt.”
Consequences for economic growth, development
If managed properly, such an expansionary budget should stimulate growth by increasing supply and productivity, which would help reduce inflationary pressures.
However, the challenge arises with the unrealistic projected revenue, which could either lead to omitting growth-stimulating crucial expenses or borrowing beyond initial estimates.
According to Chukwu, this means that essential payments, such as salaries and loan interests, will take precedence, while the ambitious infrastructure development, needed to achieve growth, may not be realized.
Chukwu is further worried about the weak structure of the economy, which poses a significant challenge, since revenues are generated from economic activities.
“The key focus should be on efforts at growing the economy. Those are the challenges I have with the budget. I think it is unrealistic and overly optimistic, and therefore makes the budget either difficult to implement in totality, or imperative for the government to borrow further, raise interest cost, and further crowd out of the private sector.”
As the year unfolds, Nigerians would watch anxiously to see these competing forces play out. The outcome would depend on the delicate balance between fiscal and monetary policies, and the ability of policymakers to navigate these complex economic dynamics.
