•Tinubu
A tough fiscal year 2025 appears to be underway following the tall order in currency valuation which may restrict the capacity of the federal government to fund the new budget.
This reduction in real value is due to the significant devaluation of the Naira in the last one year and financial experts believe if this situation is not reversed or improved, the N49.7 trillion proposed by President Bola Tinubu will not be able to provide goods and services that the N28.777 would have achieved at the end of the current 2024 budget implementation, reports Vanguard.
Already, the new forex policy of the Central Bank of Nigeria, CBN, designed to ensure the appreciation of the local currency succeeded in improving the value only for one week, only for the gains to reverse the following week up till last weekend.
In December 2023, the Naira exchange rate against the dollar was about N853/$1. The exchange rate movement has largely been against the local currency ever since, which President Tinubu told the National Assembly was in the region, N1,700 $1. The Nigerian Foreign Exchange Market (NFEM) rate on the website of the Central Bank of Nigeria as of December 21, was N1,536.93/$1.
Inflation and the Naira Exchange Rate remain two key variables in the macro-economic management that have remained intractable over the years.
The government, in the 2024 budget, set a target of an exchange rate of N800/$1.
However, the monetary policy reform that saw the monetary authorities allow the Naira to exchange at market forces has seen it go through a significant depreciation, going as low as N1,800/$1 at a time before moderating to the current rate.
Similarly, inflation has maintained an upward trajectory. Inflation which has been the main driver of the CBN’s decision to maintain hikes in Monetary Policy Rate, the benchmark for the cost of loans from banks.
However, the monster remains untamed – although the federal government argues that the rate of increase has slowed.
The federal government inflation target in 2024 was put at 21%. However, the current inflation rate, according to the latest data from the National Bureau of Statistics (NBS) stands at 34.6%. Interestingly, in the 2025 budget, President Tinubu said his target is to reduce the inflation rate to 15%, next year.
2025 Budget Basic Assumptions and Parameters
Oil Price Benchmark of 75 US Dollars per barrel;
Daily oil production estimate of 2.06 million barrels per day (mbpd);
Exchange rate of 1,500 Naira per US Dollar; and
A total of 13.08 trillion naira or 4.6 percent of GDP; and 15.75 percent inflation rate 2025
Revenue and Expenditure
Proposed Expenditure: N49.7 trillion
Total Retained Revenue: N34.82 trillion
Fiscal Deficit: N13.08 trillion.
Total expenditure is projected to be 49.7trillion naira and key notable highlights of the 2025 Budget Allocations which are aimed towards rebuilding the country are:
Defense and Security: N4.91 trillion
Infrastructure: N4.06 trillion
Health: N2.48 trillion
Education: N3.52 trillion
15.81 trillion naira for debt servicing
Others N17.12 trillion
2024 Budget Highlights
The 2024 Budget of ‘Renewed Hope’ as proposed by President Tinubu outlines a total expenditure of N27.5 trillion (equivalent to $36.7 billion), with a projected revenue of N18.32 trillion ($24.4 billion) and a deficit of N9.18 trillion ($12.2 billion).
To achieve the projected revenue, the federal government estimates Oil revenue at N7.68 trillion, Government Owned Enterprises are expected to contribute N4.07 trillion, non-oil taxes are projected to be N3.52 trillion, independent revenue is set at N1.91 trillion, minerals and mining will account for N4.55 billion, while other revenue sources will bring in N1.13 trillion.
The expenditure breakdown comprises a non-debt recurrent expenditure of N9.92 trillion, a capital expenditure of N7.72 trillion (exclusive of transfers), Debt service will take up N8.25 trillion, a statutory transfer of N1.37 trillion, and a sinking fund of N243.66 billion.
Significant achievements
President Tinubu said at the budget presentation that despite odds, the economy has made some progress in the last year.
He said: “Our economy grew by 3.46 percent in the third quarter of 2024, up from 2.54 percent in the third quarter of 2023. Our Foreign Reserves now stand at nearly $42 billion providing a robust buffer against external shocks.
“Our rising exports are reflected in the current trade surplus, which now stands at 5.8 trillion naira, according to the National Bureau of Statistics. These clear results of gradual recovery, among others, reflect the resilience of our economy and the impact of deliberate policy choices we made from the outset.
“The Budget projects inflation will decline from the current rate of 34.6 percent to 15 percent next year, while the exchange rate will improve from approximately N1,700 per dollar to N1,500 and a base crude oil production assumption of 2.06 million barrels per day (mbd),” he said.
President Tinubu said the 2024 budget recorded remarkable milestones. One of them was the N14.55 trillion in revenue, realised by the third quarter, representing 75 per cent of the target for the year.
Also, expenditures of N21.60 trillion had been recorded by the third quarter, representing 85 percent of the year’s target.
Similarly, presenting the implementation of the Presidential Interventions projects outcomes in Abuja, last Friday, the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, said Nigeria now enjoys a Current Account surplus and that President Tinubu has changed Nigeria for the better.
The minister argued that the country is better than President Tinubu met it.
His words: “So where are we today? In 18 short months, President Tinubu has already changed Nigeria for the better.
“He has changed the economy. He has got it going in the right direction. He has put in place a much more positive framework for Nigerians to focus on and to thrive, and that is starting to show.
“But you might say to me, okay, in what ways? What’s the most fundamental way that I can illustrate how Nigeria has changed.
“No more is Nigeria a place where somebody who wants to be successful in business, in commerce, in entrepreneurship, will now wake up and target allocation of foreign exchange from Central Bank at below market rate as the quickest source of doubling his investment, of increasing his money and getting rich.”
Nigeria now has Current Account surplus
On the external sector, the minister said, “Our foreign reserves have, I think, they’ve gone up, over the last 12 months, the increase is $10 billion- so from $32 billion to $42 billion and that gives us, in the first instance, it is due to the fact that we have a current account surplus. We’re exporting more than we are importing.”
In addition, the minister said that the efforts of the Governor of the Central Bank of Nigeria, Mr. Olayemi Cardoso, to attract foreign portfolio investment, as well as, remittances from Nigerians abroad had paid off.
“We have a current account balance that is 11.5% of GDP. These are definitely, I think, by any measure, these are improvements, and it’s important to mention that. So when we say things have improved, we all know that the most important improvement is what people feel.
“But before you get there, sometimes it reflects in the numbers, first and then in people’s pockets,” he said.
The minister added that the government revenue has become a lot better, with revenue to debt servicing ratio now standing at about 65 percent, instead of the 95 percent the Tinubu administration inherited.
Government’s position, notwithstanding, it is obvious that the 2024 Budget of the federal government christened “Budget of Renewed Hope,” largely failed to renew the hope of many Nigerians, especially the youth, going by the high level of the “Japa” syndrome that has become the reality of the Nigerian society.
Many who “japaied”, took the decision to go out of the country due to much frustration in the land. In the process, the nation has lost very many experts in several critical fields especially in medicine, Information and Communications Technology, engineering, banking and even from government Ministries, Departments and Agencies.
A friend related how a very major tertiary medical institution, based in Abuja, lost the whole laboratory scientists of the hospital’s Trauma Unit, from the most senior staff to the youngest staff, to brain drain.
The extent to which the 2025 budget, christened “Budget of Restoration: Securing Peace, Rebuilding Prosperity,” can secure peace across the country and rebuild prosperity among Nigerians remains to be seen in the next Fiscal Year.
