2025 Appropriation Bill: Tinubu eyes 15% inflation rate from N49.7tr budget, to spend 2% on agric
19 December 2024 |
4:46 am
President Bola Ahmed Tinubu, yesterday, presented what he described as an “ambitious but pragmatic” budget of N49.7 trillion to the joint session of the National Assembly, setting the stage for intense debate on its practicality and feasibility of the key assumptions.
• January-December implementation cycle altered by last presentation
• Food crisis may escalate as agriculture gets paltry N827b
President Bola Ahmed Tinubu, yesterday, presented what he described as an “ambitious but pragmatic” budget of N49.7 trillion to the joint session of the National Assembly, setting the stage for intense debate on its practicality and feasibility of the key assumptions.
The presentation comes barely two weeks to the end of the year, the late submission suggested that the January to December budget implementation cycle has been altered. Already, the parliament has hinted that the appropriation bill would not be passed until next year.
The President proceeded on a trip to his Lagos home for the yuletide a few hours after the ceremonial budget presentation, signalling the traditional break in governance, including lawmaking, for the Christmas/New Year celebration.
Already, the Chairman of the Senate Committee on Capital Markets and Institutions, Sen. Osita Izunaso, had explained that the delayed budget presentation would make it impossible for it to be passed by the end of December He noted that while the 2024 budget would be extended, the tradition of starting a new year with a new budget has been lost.
“The budget has a lifespan of 12 months, and we still have the liberty to extend it,” he said. This delay marks a departure from the reforms implemented by the 9th National Assembly in 2020, which shifted Nigeria’s budget cycle from June-May to January-December to enhance budget planning and performance.
The former Senate President, Ahmad Lawan, had stated that the shift to a January-December cycle would improve the effective implementation of the country’s macroeconomic framework.
The Senate and the House of Representatives went into separate closed-door sessions. Officials, including the Minister of Finance, Wale Edun and the Group Managing Director of the Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari, joined the lawmakers for deliberations.
President Tinubu had earlier emphasised the need to keep to the January-December cycle, suggesting that the parliament could be lobbied by the executive to give the appropriation bill an accelerated deliberation.
The President, in a speech dotted with applauses from lawmakers, charged Nigerians to remain resilient in keeping faith with the Federal Government’s programmes and policies.
On his economic reforms, the President noted that “the journey of economic renewal and institutional development, which we began 18 months ago as a nation, is very much underway. It is not a journey of our choosing but one we had to embark on for Nigeria to have a real chance at greatness”.
Acknowledging the pains associated with the reforms, the President said: “The road of reforms is now clearly upon us, and as the President of this blessed nation, I know this less-travelled road has not been easy. That there have been difficulties and sacrifices. They will not be in vain. And we must keep faith with the process to arrive at our collectively desired destination.”
The executive is expecting the inflation rate to decelerate from its current 34.6 per cent to 15 per cent next year to ease the pains most Nigerians currently face. But sadly, the document does not demonstrate the government would prioritise spending on some key sectors that would lift local production and lead to price moderation in the coming year.
For instance, agriculture, whose wobbly performance has pushed up good inflation to nearly 40 per cent, gets a paltry N827 billion or 1.7 per cent of the budget, which is not different from the historical trends. In the past 10 years, agriculture, the mainstay of the economy, has been allocated between one and two per cent of the total spending envelope.
The budget prioritised defence and security, which got N4.91 trillion allocation. Infrastructure gets N4.06 trillion while health and education get N2.48 trillion and N3.52 trillion respectively.
Yet, the Director-General, Budget Office of the Federation, Tanimu Yakubu, said: “To ensure food sufficiency and reduce reliance on imports, ₦826.5 billion has been allocated to agricultural mechanization, irrigation projects, and value-chain development. This will not only boost food production but also support economic diversification and rural development.”
With the President insisting that the government is not backtracking on the current reforms, higher energy may mean higher transport costs. With limited alternatives for transporting goods, farmers and distributors will continue to rely heavily on expensive road transportation, which will mean higher food prices.
The historical fiscal gaps may continue with the proposal containing a deficit of N13.08 trillion, approximately 27 per cent of the total expenditure and 3.89 per cent of the output – a violation of the Fiscal Responsibility Act (FRA).
Still, the assumptions informing the N34.82 trillion are extremely ambitious even as the figure is about nearly threefold the highest revenue generated by the Federal Government (N12.5 trillion) – according to the 2023 budget implementation report (BIR). The 2024 revenue, which the President put at 14.55 trillion, is higher than N12.5 trillion, but not by any means near N34.8 trillion, which Tinubu has set for himself next year.
If the exchange improves to N1,500 as projected by the government, the naira value of the government earnings in the coming year may not improve significantly as last and current year’s expanded nominal revenue comes mainly from currency depreciation.
Also, the government intends to service existing debts with N15.81 trillion – a figure that is slightly higher than both debt and non-debt recurrent expenditure for last year.
Economists have criticised the proposed N49.7 trillion 2025 budget for its ambitious projections, cautioning that if not properly handled could create more challenges for the economy. They are also not comfortable with the provision of N15.8 trillion for debt service, noting that the country should seek more creative ways to fund the budget than just borrowing.
Experts said the budget with its projections, given the current realities, presents significant challenges. They described the expansionary nature of the budget as conflicting with Nigeria’s contractionary monetary policy, potentially fueling inflation and worsening citizens’ economic hardships.
They emphasized the need for realistic budget assumptions, strategic borrowing for productive investments, and better allocation of funds to critical sectors to bridge Nigeria’s infrastructure gap and reduce over-reliance on volatile oil revenues.
According to them, the current parallel market exchange rate is significantly higher than the projected N1,500. This discrepancy, they say, indicates a potential for further devaluation, impacting import costs and fuelling inflation.
They also said the $75 per barrel oil benchmark appears overly optimistic given the volatile global oil market, with prices fluctuating significantly due to geopolitical events, economic slowdowns and the transition to renewable energy sources.
They also pointed out that the size of the proposed budget far exceeds the financial capacity of the government, leading to a substantial fiscal deficit.
A professor of accounting and financial development, at Lead City University Professor Godwin Oyedokun said achieving a daily production of 2.06 million barrels faces numerous hurdles, including oil theft, pipeline vandalism and ageing infrastructure.
He said the government should acknowledge the realities of the current economic situation and re-evaluate the exchange rate projection to reflect the current market realities.
He cautioned that an unrealistic exchange rate could further widen the fiscal deficit, while over-reliance on oil revenue might expose the budget to external shocks.
“Nigeria’s fiscal strategy must prioritize realistic projections that align with current economic realities,” he said. He noted that by acknowledging the challenges and implementing realistic and sustainable economic policies, the government can strive to achieve its economic objectives and improve the well-being of its citizens.
Also speaking, the Director-General of the Nigeria Association of Chambers of Commerce, Mines and Agriculture (NACCIMA), Sola Obadimu, said due to naira devaluation, the budget is small in real terms. He noted that while the N1,500 exchange rate projection may be achieved, he has doubts about the oil production projection of 2.06 million barrels per day given the volatile nature of the Niger Delta region. He said Nigeria is still a ‘monolithic’ economy surviving mainly on crude oil exports and taxes.
According to him: “We need to create an environment that encourages more business start-ups and business growth so that businesses can employ more people and pay more taxes.
“We need more non-oil exports and we need to add value to our basic exports.” On his part, Executive Director of the Civil Society Legislative Advocacy Centre (CISLAC), Auwal Musa Rafsanjani, said since assuming office, President Tinubu’s administration has borrowed N20.1 trillion, further straining the nation’s fiscal sustainability.
He said the recent Central Bank of Nigeria’s (CBN) report, which highlights an alarming rise in debt servicing costs, with $3.58 billion spent in just the first nine months of 2024, a 39.77 per cent increase compared to 2023, underscores the growing burden of Nigeria’s foreign debt obligations, exacerbated by rising exchange rates and fluctuating oil revenues.
He said the government should focus on addressing structural issues, diversifying revenue streams, and implementing fiscal reforms to reduce reliance on borrowing.He said the government must pursue a dual-track approach, combining immediate and long-term measures to address revenue challenges sustainably.
The short-term measures he said include strengthening revenue mobilisation, debt restructuring as well as ensuring efficiency in its expenditures. On the long-term measures, Rafsanjani suggests economic diversification, stabilisation of the exchange rate and ensuring debt transparency.
In reaction, the senator representing Kogi East, Isah Jibrin Echocho, expressed concerns over the growing burden of Nigeria’s debt as outlined in the 2025 budget.
While Echocho acknowledged the budget’s strategic focus on critical areas like security, infrastructure, and human capital development, he cautioned that the substantial allocation for debt servicing could hinder the country’s long-term fiscal sustainability.
Senator Seriake Dickson, a former governor and current member of the Senate Committee on Tertiary Education, commended the budget’s emphasis on human capital development, education, healthcare and security.
He lauded the budget’s focus on investing in Nigerians, particularly through substantial allocations for education and healthcare. Despite the concerns, Dickson described the 2025 budget as an optimistic and ambitious plan that has the potential to drive Nigeria’s recovery and growth.
Senator Victor Umeh, representing Anambra Central and Citroën districts, expressed both optimism and caution on the budget, highlighting concerns over Nigeria’s growing debt burden and deficit.
While Umeh praised the budget for its focus on critical sectors such as defence and security, infrastructure, education, and healthcare, he raised concerns about the heavy reliance on borrowed funds to finance the ambitious spending plan.
The Chairman of the Senate Committee on Capital Markets and Institutions, Osita Izunaso (APC, Imo West), spoke to the issue of the late submission of the 2025 budget proposals insisting it would not make the January to December national Budget cycle possible this year.
The President of the Senate, Sen. Godswill Akpabio, had in his welcome address, lauded President Ahmed Tinubu’s groundbreaking tax reform initiatives. Akpabio emphasized that the four key tax reform bills would play a pivotal role in strengthening Nigeria’s fiscal structure and driving sustainable economic growth.
The tax reforms, which include the Joint Revenue Board of Nigeria (Establishment) Bill, Nigeria Revenue Service (Establishment) Bill, Nigeria Tax Administration Bill and Nigeria Tax Bill, 2024, represent the most significant overhaul of the country’s tax system since independence.
According to Akpabio, these reforms are vital not only for improving government revenue but also for creating a more conducive business environment that will support the growth of small and medium enterprises (SMEs).
The Ijaw National Congress (INC) and a lecturer at the Department of Economics, Ignatius Ajuru University, Rivers State, Associate Prof. Williams Nzijee, doubted the reality of the 2025 budget.
According to the don, a budget of reality is where the citizens and the economy are put into consideration in the budgeting processes with the aims of reducing poverty, unemployment, and inflation, increasing food supply and creating industries.
The economics lecturer lamented that the budget is not real in addressing the above challenges, adding that Tinubu’s administration has never put the poor masses into consideration in its policies but stated that the elites are the ones benefiting from his policies while the poor citizens suffer.
On his part, the INC National Publicity Secretary, Ezonebi Oyakemeagbegha, said the organisation does not have confidence in the assurances contained in the 2025 budget until Nigerians begin to see things improve physically.
But disgusted by the drama that ensued at the plenary during the presentation, a Southwest group, Yoruba Ronu Leadership Forum, said it is taken aback, worried and utterly confused about what took place at the Senate chambers when Mr. President presented his 2025 budget to the National Assembly.
President of the forum, Akin Malaolu, said: “The National Assembly, which is a sacred institution for lawmaking and oversight functions within our democratic governance is not also a political space for such songs like “On your mandate we shall stand” at the time the most important ritual of budget presentation. Such did not take place in 2023, and we view this rascality with a mixture of gangsterism as not only a declaration of war but also a show of shame.”
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