President Bola Ahmed Tinubu, during his presentation of a N49.7 trillion 2025 budget proposal to a joint session of the National Assembly, has emphasized bold economic targets that include a dramatic reduction in inflation and stabilization of the naira.

Speaking on Wednesday during the budget presentation, Tinubu said inflation, which currently stands at 34.6%, is projected to decline to 15% by next year. The president also forecasted an improvement in the exchange rate, with the naira expected to strengthen from approximately N1,700 per US dollar to N1,500.

“This is an ambitious but necessary budget to secure our future,” Tinubu said during his address. “The Budget projects inflation will decline from the current rate of 34.6 per cent to 15 per cent next year, while the exchange rate will improve from approximately 1,700 naira per US dollar to 1,500 naira, and a base crude oil production assumption of 2.06 million barrels per day.”

He explained that the budget’s projections are based on strategic observations, such as the reduction of petroleum product imports, increased export of refined petroleum products, improved agricultural yields due to enhanced security, and reduced reliance on food imports.

Tinubu highlighted key allocations in the budget, with defense and security receiving N4.91 trillion, infrastructure N4.06 trillion, health N2.4 trillion, and education N3.5 trillion.

The president noted that crude oil production is projected at 2.06 million barrels per day, forming a critical component of the budget’s revenue assumptions.

Tinubu’s optimism comes against the backdrop of severe economic challenges that have left Nigerians reeling from inflation and a volatile exchange rate. On Monday, the National Bureau of Statistics (NBS) announced that the headline inflation rate rose to 34.6% in November 2024, up from 33.88% in October. This marks an increase of 0.72 percentage points in a single month.

The year-on-year figures paint an even bleaker picture, with the inflation rate 6.4 percentage points higher than in November 2023, when it stood at 28.2%. Food inflation, which directly impacts the daily lives of Nigerians, surged to 39.93% in November 2024, up from 32.84% in the same month last year.

Meanwhile, the naira has continued its downward spiral in the foreign exchange market, trading as high as N1,700 per dollar in recent days.

How Realistic Are the Projections

Against this backdrop, the president’s projection that the naira will drop to N1500 per dollar has been critiqued. Analysts have noted that the naira’s poor performance in the FX market is largely tied to rising inflation.

“The Naira is currently bad, true. And that’s because the inflation rate in the domestic economy is in tatters.  For as long as inflation continues to rise, the FX rate will suffer,” Rufy, a financial analyst, said.

This means, going by the president’s projection that the inflation rate will decline to 15% next year, the exchange rate is expected to drop below N1,000 per dollar.

Budget Assumptions and Challenges

Tinubu’s budget assumes a reduction in petroleum imports as local refineries, including the much-anticipated Dangote Refinery, ramp up production. The government also expects a bumper agricultural harvest fueled by enhanced security measures, which should reduce food import dependency.

However, achieving these goals will not be without challenges, according to economists. Crude oil production has consistently fallen short of targets due to theft and pipeline vandalism, while insecurity in farming regions continues to disrupt agricultural activities.

Furthermore, the removal of fuel subsidies has worded inflation, pushing up transportation and food costs. This has left many Nigerians questioning how the government plans to bring inflation down to 15% without a comprehensive strategy to mitigate these pressures.

The widening gap between official projections and the harsh realities faced by the populace has bolstered these concerns. Critics point to previous budgets that failed to achieve their targets as bases for the lack of trust in government’s ability to implement the current projections.

The National Assembly has approved the extension of the 2024 Budget’s lifespan to June 2025, a decision aimed at ensuring the continuity of fiscal operations and the uninterrupted execution of critical government projects.

The announcement was made by the President of the Senate, Godswill Akpabio, during a joint session of the National Assembly where President Bola Ahmed Tinubu presented the 2025 Appropriation Bill.

This extension, widely seen as a strategic move to accommodate the government’s reform agenda, has sparked debate among economists and fiscal analysts, some of whom argue that running two budgets concurrently could complicate the nation’s fiscal framework.

In his opening remarks, Senator Akpabio praised President Tinubu for his bold reforms, describing them as pivotal steps toward addressing Nigeria’s economic challenges and laying the groundwork for sustainable development. He highlighted the administration’s legislative initiatives, including the Tax Reform Bill and the Nigerian Revenue Service Establishment Bill of 2024, as evidence of Tinubu’s commitment to a prosperous and technologically advanced Nigeria.

Akpabio asserted that these measures were necessary for modernizing the country’s fiscal policies and aligning them with contemporary realities.

The Senate President emphasized the need for accountability in the budget process, urging Ministries, Departments, and Agencies (MDAs) to take their roles in budget defense seriously. He warned that the National Assembly would not tolerate delays or non-compliance by MDAs, pledging decisive action against any that fail to appear for budget defense sessions.

Details of the 2025 Budget Proposal

Tinubu presented an N47.9 trillion budget proposal for 2025, highlighting allocations to critical sectors, a significant deficit, and ambitious macroeconomic targets. Defense and Security received the largest share of the budget, amounting to N4.91 trillion, underscoring the government’s focus on addressing Nigeria’s pervasive security challenges.

Infrastructure was allocated N4.06 trillion, in a show of the administration’s seeming commitment to tackling the country’s infrastructural deficits.

Education received N3.5 trillion, emphasizing the importance of human capital development, while N2.4 trillion was earmarked for Health to strengthen Nigeria’s struggling healthcare system.

Debt servicing remained a significant concern, with N15.81 trillion allocated to meet the country’s debt obligations. This represents a substantial portion of the budget, further highlighting Nigeria’s mounting fiscal challenges. The budget proposal also included a projected revenue of N34.8 trillion, leaving a deficit of N13 trillion, which will be financed through borrowing and other sources.

Inflation and Exchange Rate Projections

Tinubu projected a decline in Nigeria’s inflation rate from 34.3% to 15% by the end of 2025, alongside an improvement in the exchange rate from N1700/$ to N1400/$. These projections are seen as ambitious, with analysts noting that their realization will depend on the success of ongoing reforms and broader macroeconomic stability.

Economists Criticize Concurrent Budgets

Economists have warned that such overlap might lead to inefficiencies in project execution and undermine transparency in public expenditure. They contend that this could lead to inefficiencies in project funding and implementation, as resources might be spread too thin or mismanaged due to competing priorities.

Analysts also expressed concerns about transparency, noting that tracking expenditures across two fiscal years could pose significant challenges for oversight bodies. They argue that while the extension might ensure the continuity of projects, it could also delay the initiation of new initiatives outlined in the 2025 Budget.

Debt Servicing and Other Concerns

The allocation of N15.81 trillion to debt servicing in the 2025 budget reflects the escalating burden of Nigeria’s public debt. Observers note that this level of debt servicing severely limits the government’s ability to fund development projects and social programs, effectively crowding out other critical expenditures. The budget deficit of N13 trillion further worsens concerns about Nigeria’s fiscal sustainability, with calls for more aggressive measures to boost revenue generation and reduce borrowing.

While the substantial allocation to defense and security highlights the government’s recognition of Nigeria’s ongoing security challenges, analysts argue that the impact of these funds depends on their efficient utilization. Nigeria’s fragile security situation remains a significant deterrent to foreign direct investment (FDI), with potential investors often citing the risks posed by widespread insecurity. Addressing this issue effectively could play a crucial role in reversing the country’s declining FDI inflows.

Although many are critical of the budget extension and 2025 proposals, others argue that the measures are necessary to support the Tinubu administration’s ambitious reform agenda. Akpabio expressed confidence that the reforms would yield significant benefits for the country’s economy and citizens.