The 2025 federal budget, amounting to N48 trillion with a revenue forecast of N35 trillion, resulting in a deficit exceeding N13 trillion or four per cent of GDP, reflects a continuation of business-as-usual fiscal practices. This represents a persistent trend under the APC-led administration since 2016, wherein budget deficits have been consistently presented, accompanied by an increasing reliance on external borrowing.

The administration plans to secure over N13 trillion in new borrowings to bridge this fiscal gap, including N9 trillion in direct borrowings and N4 trillion in project-specific loans. This borrowing strategy mirrors the approach of previous administrations, resulting in rising public debt and exacerbating the attendant risks related to interest payments and foreign exchange exposure.

The 2025 budget’s capacity to foster sustainable economic growth and tackle Nigeria’s deep-rooted challenges is questionable. Key issues arise from several factors:

1. Weak Budgetary Foundations: The 2024 budget’s underperformance signals poor budgetary execution. By Q3 of the fiscal year, less than 35 per cent of the allocated capital expenditure for MDAs had been disbursed, despite claims of 85 per cent budget execution. This underperformance in capital spending, crucial for fostering economic transformation, raises concerns about executing the 2025 budget.

2. Disproportionate Debt Servicing: Debt servicing, which accounts for N15.8 trillion (33 per cent of the total expenditure), is nearly equal to planned capital expenditure (N16 trillion, or 34 per cent). Moreover, debt servicing surpasses spending on key priority sectors such as defence (N4.91 trillion), infrastructure (N4.06 trillion), education (N3.52 trillion), and health (N2.4 trillion). This imbalance will likely crowd out essential investments and perpetuate a cycle of increasing borrowing and debt accumulation, undermining fiscal stability.

3. Unsustainable Government Expenditure: The government’s recurrent expenditure remains disproportionately high, with over N14 trillion (30 per cent of the budget) allocated to operating an oversized bureaucracy and supporting inefficient public enterprises. The lack of concrete steps to curb wastage and enhance the efficiency of public spending exacerbates the fiscal challenges, leaving limited resources for development.

4. Insufficient Capital Investment: After accounting for debt servicing and recurrent expenditure, the remaining allocation for capital spending, ranging from 25 to 34 per cent of the total budget, is insufficient to address Nigeria’s infrastructure deficit and stimulate growth. This equates to an average capital allocation of approximately N80,000 (US$45) per capita, insufficient to meet the demands of a nation grappling with slow growth and infrastructural underdevelopment.

5. Regressive Taxation and Economic Strain: The administration’s decision to increase the VAT rate from 7.5 to 10 per cent is a retrogressive measure that will exacerbate the cost-of-living crisis and impede economic growth. The government risks stifling domestic consumption and further deepening economic hardship by imposing additional tax burdens on an already struggling populace while failing to address governance inefficiencies.

In conclusion, the 2025 budget lacks the structural reforms and fiscal discipline required to address Nigeria’s multifaceted economic challenges. To enhance the budget’s credibility, the administration must prioritize the reduction of inefficiencies in government operations, tackle contract inflation, and focus on long-term fiscal sustainability rather than perpetuating unsustainable borrowing and recurrent spending patterns. 

A shift towards a more disciplined and growth-oriented fiscal policy is essential for the nation’s economic recovery.

Atiku Abubakar is a former vice president of Nigeria (1999-2007) and presidential candidate of the Peoples Democratic Party (2023)