Federal Government Proposes ₦54.2 Trillion Budget for 2025 Amid Economic Concerns ABUJA – The Nigerian government has proposed an upward revision of the 2025 national budget to ₦54.2 trillion, marking a 9.1% increase from the initial ₦49.7 trillion presented to the National Assembly on December 18, 2024. President Bola Ahmed Tinubu formally communicated this adjustment through a letter addressed to the Senate, which was read during a plenary session by Senate President Godswill Akpabio. The letter, titled “2025 Appropriation Bill: Allocation of Additional Revenue of ₦4.53 Trillion,” outlined the sources of the extra funds and their intended allocations. Sources of Additional Revenue in the 2025 Budget The budget increase stems from improved revenue generation by key government agencies: With the added revenue, the total 2025 budget size will expand from ₦49.7 trillion to ₦54.2 trillion, which, according to the president, aligns with his administration’s commitment to inclusive growth and economic security. Proposed Allocation of Additional Funds The additional ₦4.5 trillion will be directed toward critical sectors, including: Concerns Over Inflation and Fiscal Deficit Despite the government’s optimism, economic experts have raised concerns about the implications of the budget expansion, citing potential risks such as: Economists Warn Against Fiscal Imbalance According to David Adonri, Vice Chairman of Highcap Securities Limited, the budget increase could negatively impact macroeconomic stability. He criticized the government’s failure to balance its fiscal policies, warning that excessive public spending amid limited goods supply would exacerbate inflation. Similarly, Oluwole Adeosun, former President of the Chartered Institute of Stockbrokers (CIS), expressed concerns over the growing budget deficit, currently at ₦13 trillion. While he acknowledged the need for higher government spending, he cautioned that the deficit must be properly managed to avoid excessive public debt accumulation. Revenue Projections and Overestimation Risks Public finance analyst Clifford Egbomeade questioned whether the projected revenues from FIRS, Customs, and other agencies were realistic. He warned that revenue underperformance could widen the fiscal deficit, forcing the government to borrow more and worsening economic instability. Furthermore, Dele Oye, President of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), expressed concerns over the lack of clarity regarding the revenue projections. He stressed the need for transparency to ensure that the additional funds are judiciously allocated to productive sectors. Public Reactions: Economic Hardship on the Rise? Nigerians have reacted strongly to the budget increase, with many expressing concerns about rising inflation, economic hardship, and government insensitivity. Entrepreneur Endurance Osibanjo criticized the government’s approach, stating that rather than alleviating economic hardship, policymakers are imposing heavier burdens on citizens. Joshua Ajewole, a publisher, echoed this sentiment, arguing that government policies widen the gap between the rich and the poor. Similarly, journalist Manoah Kikekon decried the continuous price hikes, stating that the administration is making life more difficult for Nigerians. Public relations expert Iranitiola Olutayo warned that increased government spending without accountability and proper execution could lead to economic stagnation rather than progress. Conclusion: Will the Budget Increase Benefit Nigerians? While the ₦54.2 trillion budget aims to stimulate growth, the lack of transparency, revenue concerns, and potential inflationary pressures raise critical questions. Experts argue that for the increased budget to have a meaningful impact, it must be backed by effective fiscal discipline, strategic execution, and a commitment to reducing Nigeria’s debt burden. The National Assembly is expected to pass the final budget by February 2025, after which President Tinubu will sign it into law. Until then, the debate over its potential impact on Nigeria’s economic future continues. READ ALSO: Follow the LMSINT MEDIA channel on WhatsApp: Join Our WhatsApp Group Hear: Chat on WhatsApp Join our Telegram Chanel.
Nigeria’s challenge lies in failing to harness the successes of past reforms. One prime example is the transformation of the telecommunications sector through privatisation, marked by the denationalisation efforts that reshaped the industry. Prior to these changes, Nigerian Telecommunications Limited (NITEL), a state-run entity founded in 1985, struggled with inefficiencies, obsolete infrastructure, and limited service. By the late 1990s, it was clear that state control hindered growth and couldn’t keep up with rising demand. The pivotal National Telecommunication Policy of 2000 paved the way for the privatisation of NITEL and the sector’s deregulation. The auction of GSM licenses by the Nigerian Communications Commission (NCC) in 2001 revolutionised the industry, leading to unprecedented expansion. By 2020, mobile phone usage had surged from a mere 0.4% in 2000 to over 80%. However, when Nigeria attempted a similar approach with the power sector in 2013, the outcome was vastly different. Rather than attracting competent investors, the process drew speculators lacking technical skills and financial strength. Despite inheriting significant assets from the Power Holding Company of Nigeria (PHCN) and receiving trillions in government support, the Distribution Companies (DISCOs) have been unable to ensure reliable power. Financial troubles plague all 12 DISCOs, with five taken over by banks or the Asset Management Corporation of Nigeria. The Central Bank of Nigeria has injected over N2 trillion to enhance power generation and distribution, yet the capacity remains below 5,000 megawatts for a population exceeding 200 million. A telling sign of DISCOs’ shortcomings is their failure to meter 8 million of their 13.2 million customers over a decade, contributing to their financial difficulties. In 2020, the Nigeria Electricity Regulatory Commission (NERC) launched the Service-Based Tariff (SBT) system, segmenting customers into bands (A to E) based on their electricity supply hours and usage, with higher tariffs for higher consumption. For instance, Band A users, receiving a minimum of 20 hours of power daily, pay the most. While this system aimed to reflect cost and ensure payment proportionality, it defies typical economic principles. Unlike volume discounts, SBT penalises higher usage with higher costs, pressuring manufacturers who already struggle under a 30% borrowing interest rate. The Manufacturers Association of Nigeria (MAN) has highlighted that over 500 companies have shut down due to these burdens. The liquidity crisis in the power sector, estimated at N3.7 trillion, threatens electricity generation. Although the rationale behind tariff hikes was to infuse liquidity and improve services, DISCOs’ collection efficiency remains poor. Between 2020 and 2024, they billed N3.96 trillion but collected only N2.86 trillion, losing 30% of potential revenue. Unpaid bills in July 2024 alone amounted to N28.97 billion, representing nearly 18% of their revenue. Additionally, neighboring countries made no remittances on $14.39 million in invoices, highlighting inefficiencies passed onto consumers as high tariffs. Initially targeting affluent estates and commercial areas, SBT’s high tariffs have spread to diverse socioeconomic communities. While elites offset costs through alternative energy sources, lower-income groups face hardships. Companies with the means, like Just Rite Superstores, have opted for off-grid solutions—spending $6.5 million due to high tariffs and poor service. However, not many businesses can afford such measures, limiting growth and job creation. READ ALSO: Nasarawa to track killers of military officer, others With energy expenses comprising 35-40% of production costs, and bank interest rates at about 30%, the industrial sector continues to suffer. Lessons could be taken from countries like Kenya, where reduced energy tariffs stimulate industrial growth. While telecom firms in Nigeria attract customers with incentives, pseudo-privatised DISCOs push for continuous tariff hikes, harming the economy. Experts argue that revamping the flawed power sector privatisation by involving more competent, technically adept, and financially solid investors is essential to revitalise the sector.
