How Nigeria’s 2025 budget will impact the economy

On December 18, 2024, the president of Nigeria, Bola Ahmed Tinubu, presented the 2025 budget tagged “Restoration Budget – Securing peace, Rebuilding prosperity”. It is a record N47.9 trillion budget, an increase of N22.2 trillion from the 2024 “Budget of Renewed Hope”. The budget of restoration has many things to offer Nigerians. The budget priorities are: defence and security (N4.91 trillion, infrastructure (N4.06 trillion), education (N3.50 trillion), and health (N2.48 trillion). The budget would be financed by: equity (70%), loans (28%) and asset sales (2%). The budget will consolidate on key reforms such as the new minimum wage, duty-free food imports, and tax updates. It has a target inflation rate of 15 percent and GDP growth rate of 4.60 percent. N4,435,761,358,925 is for statutory transfers, while N16,327,142,689,549 is for debt service. It is a budget that is designed to help Nigeria’s economic emancipation and industrial growth.

N14,123,544,196,406 is for recurrent (non-debt) expenditure while the sum of N14,853,717,110,517 is for contribution to the Development Fund for Capital Expenditure for the year ending on the 31st day of December, 2025. Capital expenditure or capital expense is the amount of money an organisation or state spends to procure, maintain, or improve its fixed assets such as buildings, roads, vehicles, equipment, lands etc. The budget deficit, that is, income less expenditure is N13,387,963,181,097. This will be financed through loan and sale of assets. The amount of capital expenditure is usually the determinant of budgets success apart from budget monitoring and control, and early implementation of budget. N14.85 trillion capital expenditure means there will be more funds in the economy than the previous year which had N4.93 trillion.

Capital expenditure (excluding statutory transfer component) of N4.93 trillion represented about a quarter of the 2023 expenditure budget which decreased by 8.88 percent from the 2022 budget. There was non-debt recurrent expenditure of N8.76 trillion in the 2024 budget. This means that an additional N6.09 trillion or about 69.5 percent of the 2024 budget has been added to the 2025 budget as capital expenditure. This amount will be used to finance construction and maintenance of roads, buildings, bridges and hospitals etc. Construction activities have the potentials of generating employment for people, generating income and providing infrastructure on which life depends. The 1999 constitution of the Federal Republic of Nigeria in Chapter II, Section 15(3) states that “For the purpose of promoting national integration, it shall be the duty of the State to: (a) provide adequate facilities for and encourage free mobility of people, goods and services throughout the Federation.”

As noted above, the major objective of construction is the provision of physical infrastructure. According to the Kathmandu Final Workshop Report (2009), infrastructure provision can help solve four (4) problems. These are: social, health and environment, development (environmental and social), and economics. A region’s infrastructure network, broadly speaking, is the very socio-economic climate created by the institutions that serve as conduits of trade and investment. It also involves large flows of expenditure, thereby creating additional employment and wealth creation. Studies have shown that infrastructure can have a significant impact on output, income, employment, international trade, and quality of life. Infrastructure provision can help develop modern infrastructure as well as beefing up infrastructure deficit especially in Nigeria where the deficit is still very high.

With proper implementation of the budget of restoration, tolerating minimum corruption, Nigerians will benefit from the budget especially in the area of job and wealth creation. Mr Babatunde Raji Fashola, the then Minister of Works and Housing said in 2022 that the Lagos-Ibadan Expressway (127 km) costing N310 billion, Abuja-Kaduna-Zaria-Kano Expressway (375 km) costing N797 billion and Second Niger Bridge (11.59 km) costing N206 billion collectively created 5,246 direct jobs and 13,998 indirect jobs. The Lagos – Calabar Coastal Highway is a 700 kilometre project that will run from Victoria Island to Calabar, Cross River State passing through nine states of Lagos, Ogun, Ondo, Benin, Delta, Bayelsa, Rivers, Akwa Ibom and Cross River. It is a mega project with a railway in the middle costing N4.00 billion per kilometre and N2.8 trillion in total. This project alone is poised to generate a minimum of 50,000 direct and indirect jobs including food vending and security jobs across the nine states. With other projects, about half a billion direct and indirect jobs will be created!

The 2025 Appropriation Bill estimates expenditure of N49.7 trillion which is significantly above the 2024 approved budget size of N28.8 trillion will definitely secure peace and rebuild prosperity. A whopping sum of N4.06 trillion for infrastructure development will greatly impact job provision and market dynamism as purchasing power parity (PPP) of the citizens will improve due to higher income that will flow in the economy. As promised, if the president can bring down the inflation rate in Nigeria from the current 35 percent to 15 percent, the masses will surely feel the impacts of the budget in the economy. The exchange rate is also expected to drop from the current N1,700 per US dollar to N1,500. We are already seeing signs that the crude oil production will increase to 2.06 million barrels per day before the first quarter of 2025. The significant increase of the budget from the 2024 budget of 74.18 percent will definitely make a positive difference in the economy.

The 2025 budget seeks to: restore macroeconomic stability, enhance the business environment, foster inclusive growth, employment, and poverty reduction, promote equitable income distribution and human capital development. N34.82 trillion in revenue is being targeted to fund the budget. This means that about 70 percent of the budget will be funded by internally generated revenue (IGR). The budget allocation for health is short of the 15 percent target set by the Abuja Declaration. It is proposed that two percent of the budget proposal will come from sale of national assets. This will amount to N994 billion. In a country with a high level of abandoned properties which experts estimate to worth over N9.0 trillion, generating about N994 billion (about 10 percent of wasting assets) is unpalatable. The Federal Government can improve by selling about 20 percent of the wasting assets in 2025 to generate about N2 trillion.

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