Weak revenue base raises concerns over FG’s N47.9trn 2025 expenditure
Onome Amuge
In a development that threatens to exacerbate the government’s fiscal woes, the federal government recently tabled a N47.90 trillion budget proposal for 2025, far surpassing the initial N28.7 trillion budget approved for 2024, which was later increased to N35.06 trillion, following supplementary approvals.
According to analysts, this ambitious proposal, indicative of the government’s rising spending plans, puts the focus on the increasingly tenuous state of public finances, especially given the declining revenue trends.
The proposed budget for 2025, a 36.62 percent increase from the amended 2024 budget, reveals a spending plan of staggering proportions. A close inspection of the figures reveals a 36.62 percent year-on-year surge in total planned expenditure, with non-debt recurrent expenditure leaping by 26.09 percent, while capital expenditure experienced a 1.16 percent dip from its previous year’s level.
Meanwhile, debt service plans spiked 86 percent to N15.38 trillion, sending the government’s debt burden into overdrive compared to last year’s N8.27 trillion.
Desperate to fund its ambitious spending plans, the federal government has cooked up a revenue target for 2025 that’s as ambitious as it is controversial.
A 34.54 percent rise in projected revenues, hitting N34.82 trillion, though an impressive leap from the amended 2024 figure of N25.88 trillion, but the proposed figures are contingent on government-owned enterprises (GOEs) coughing up the goods.
The government’s projected revenue for 2025 heavily relies on oil sources, with N19.6 trillion, a 139 percent increase from the 2024 projected figure of N8.18 trillion, resting on the petrochemical industry’s shoulders.
On the other hand, the non-oil revenue projection of N15.22 trillion for 2025 is inflated by FGN’s non-oil tax revenues, a N5.71 trillion projection, almost double the N3.52 trillion from 2024.
The projection for independent revenue is projected at N3.47 trillion, up from N2.69 trillion, while the projection for Grants and Donor funded projects is N711.11 billion.
The government’s fiscal hopes rests on a delicate house of cards, with its revenue projections hinging on a series of gambles. Hoping for a crude oil price of $75 per barrel (a drop from 2024’s $78 benchmark), and a crude oil production rate of 2.06 million barrels per day (up from 1.78 mbpd), the government’s projected revenue targets seem ambitious, particularly when juxtaposed against an exchange rate of N1,400 to the dollar, and rising inflation rate..
The government’s plan to accelerate the nation’s economic trajectory hinges on three key investments: infrastructure, agriculture, and social services. Although the economy currently leans heavily on consumption, the administration foresees an uptick in domestic oil refining capacity, telecommunications, crop production, and employment as the catalysts for growth, with the non-oil sector poised to power the majority of the projected economic expansion.
The projected fiscal deficit for 2025 at N13.08 trillion, dwarfs the N9.18 trillion deficit for 2024. As the government balances on a fiscal tightrope, it seeks to fill the void through a three-pronged approach: privatisation proceeds (N312 billion), multilateral and bi-lateral tied loans (N3.55 trillion), and borrowing (N9.22 trillion), with the lion’s share of domestic debt planned to be raised from the domestic debt market (N7.37 trillion) and the rest (N1.84 trillion) sought from foreign sources.
Cowry Research views the 2025 budget as ambitious but risky. The analysts noted that sustained increase in recurrent expenditure over capital spending, with a ratio of 1.04x, raises concerns about inefficient allocation and inflationary pressures, particularly with inflation currently exceeding 30 percent (approximately 33.88%).
According to Cowry Research, “The government’s inflation projection of 15.75 percent appears overly optimistic given the current trends.
“The aggressive revenue targets seem overly ambitious, particularly given Nigeria’s historical challenges with revenue underperformance. Between January and August 2024, aggregate revenue was N12.7 trillion, raising doubts about achieving the projected N34.82 trillion for 2025.
“The assumptions underpinning oil production and pricing also carry risks. While the $75 per barrel benchmark appears reasonable, downside risks include weak demand from China, rising global supply from the U.S., Canada, and Brazil, and the
potential easing of OPEC+ production cuts. Similarly, the oil production target of 2.06 mbpd seems overly optimistic, as current production levels hover around 1.3 mbpd (excluding condensates), according to official data.”
According to the analysts, while the timely passage of the budget within the January–December fiscal cycle is commendable, the framework underscores the need for fiscal discipline and more realistic assumptions.
They also noted that without addressing the structural inefficiencies that drive recurrent spending and limit revenue generation, achieving the ambitious targets in the 2025 budget will remain a significant challenge.