In a significant development for Nigeria’s fiscal future, the House of Representatives has passed the ₦54.99 trillion 2025 budget, marking a pivotal moment in the country’s economic planning. The budget, initially proposed at ₦52.2 trillion, was increased by President Bola Tinubu to ₦54.99 trillion, reflecting an adjustment to meet the country’s growing security and social needs.
Budgetary Increases and Their Implications
The approved budget includes a ₦2.42 trillion capital expenditure allocation to enhance infrastructure and ₦500 billion for poverty alleviation initiatives. Allocations for defense and security have also increased to ₦1.08 trillion to address ongoing threats from insurgencies and terrorism. Furthermore, the health and education sectors have received ₦800 billion and ₦1.35 trillion respectively.
This expansionary approach to the budget highlights the government’s efforts to stimulate growth through increased spending, particularly in social sectors. However, it also reflects a deeper tension within Nigeria’s economic strategy.
Tensions with Economic Reforms
While the expansionary budget signals efforts to revamp revenue collection and reduce reliance on borrowing, it poses a significant challenge to ongoing economic reforms, especially those related to currency stabilization. The Central Bank of Nigeria (CBN) has been focused on stabilizing the exchange rate, with measures such as interest rate hikes, unification of exchange rates, and clearing the foreign exchange backlog. Despite some positive outcomes, CBN Governor Olayemi Cardoso expressed concerns that fiscal policies are not aligned with these monetary reforms.
A similar sentiment was shared by the World Bank Resident Representative in Nigeria, who called for better coordination between fiscal and monetary policies. The increase in the 2025 budget, by 9.5%, points to political resistance against orthodox inflation control and currency stabilization strategies. Analysts have warned that if these disconnects persist, the naira could weaken significantly, with some predicting it could fall to as low as ₦1,700 per dollar by mid-2025.
Outlook for 2025
While the budget seeks to improve living standards through increased allocations for vital sectors, its expansionary nature raises concerns about its potential to undermine the hard-fought gains of Nigeria’s monetary policy. The continued disconnect between fiscal policies and the CBN’s efforts to stabilize the economy could further complicate the country’s efforts to rein in inflation and stabilize its currency in the coming year.
