2025 budget: Why FG approved to borrow N13.8 trillion

Abuja—The Federal Executive Council (FEC) approved a budget proposal of N47.9 trillion for the fiscal year 2025 and a borrowing of N13.8 trillion, yesterday.

The minister of budget and economic planning, Atiku Bagudu revealed this to state house reporters at the Presidential Villa in Abuja.

The meeting was reportedly chaired by President Bola Tinubu according.

The approval is included in the Fiscal Responsibility Act of 2007’s Medium Term Expenditure Framework (MTEF), and Fiscal Strategy Paper for 2025–2027.

As mandated by law, the framework is anticipated to be delivered to the national assembly on Friday or Monday.

Bagudu listed a number of crucial criteria that will direct the 2025 budget based on government priorities and economic forecasts.

These include a benchmark oil price of $75 per barrel, an exchange rate of N1,400 to $1, and a predicted GDP growth rate of 4.6% for 2025.

The government also expects to produce 2.06 million barrels of oil per day.

According to the budget’s fiscal strategy, the government will borrow about N13.8 trillion, or roughly 3.87% of GDP.

The reason for the borrow is to finance important economic and infrastructure projects according to source.

Bagudu underlined that this borrowing is a component of a larger strategy to control government spending in a sustainable manner.

The minister added that: “the Nigerian economy is showing signs of resilience, with a 3.19% growth rate recorded in the second quarter of 2024.

“This growth is expected to continue through 2025, driven by efforts to tackle inflation and stabilize key economic sectors”, he said.

Bagudu lists goals of fiscal policies

He emphasized the goals of the Federal Government’s fiscal policies.

This, he asserted, are to increase economic resilience, keep up with inflationary pressures, and offer more focused assistance to promote long-term growth.

Despite some setbacks in reaching prorated targets, Bagudu also emphasized that the 2024 budget’s implementation was going well.

He pointed out the notable advancements in revenue collection and expenditure management.

“Non-oil revenue streams, in particular, have performed better than initially expected, showing promising progress.

“The N47.9 trillion proposed budget for 2025 includes various provisions, particularly in areas such as infrastructure development, social programs, and critical national projects”.

Bagudu also disclosed that the government’s budget will for the first time contain funding for the development commissions.

The national assembly had either recently enacted or was in the process of passing, according to source.

“These measures are designed to strengthen the country’s social and economic development at the grassroots level”.

He added that the federal government is dedicated to making sure that the 2025 budget is approved and signed into law before December 2024.

He suggested that it is in order to establish a stable fiscal environment and follow the January-December budget cycle that the administration intends to adopt going forward.

The 2025-2027 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Papers (FSP) present the government’s long-term fiscal policies and strategies for attaining sustainable growth.

They were also approved by the FEC together with the 2025 budget.

The national assembly will now receive these documents for additional consideration.

Bagudu stressed that the MTEF and FSP offered the essential framework for the government’s fiscal policy for the ensuing three years.

This is to keep public finances stable and meet economic growth goals, according to Bagudu.

He was confident that Nigeria’s economy was headed in the right direction and that important industries were seeing strong growth.

He emphasized that the macroeconomic policies of the government are supporting the nation’s overall economic stability, especially in the sectors of foreign exchange and petroleum product pricing that are determined by the market.

“The fiscal efforts are on track, and we are confident that with these strategic investments and reforms, Nigeria will continue to make progress toward a more resilient and sustainable economy”, he stated.

Experts criticize government’s fiscal projections

However, the budget assumptions were criticized by economy specialists.

They said that some of them were very aggressive.

An analyst and executive vice chairman of Highcap Securities Limited, David Adonri disclosed his opinion.

He said: “One thing that bothers me is the failure of FGN to attach a report of the performance of the previous budget while seeking for approval of the new budget.

“Historical antecedents will let us know whether the assumptions underlying the new budget are reasonable.

“How will FGN finance the budget?

“Is it still a deficit budget like on previous occasions?

“There is nothing on ground to indicate that GDP growth rate of 4.6% is attainable in 2025.

“The omission of the forecast for inflation is questionable because the intended GDP growth may just be an inflationary growth which is akin to motion without movement.

“With Donald Trump’s agenda to release more fossil fuel from 2025, the crude oil price forecast may be misleading.

‘Finally, predicating the budget on a crude oil-driven economy shows that budgeting by FGN has not departed from past ruinous economic philosophy.

“It is too pedestrian for a country that should be inward-looking and focused on the mobilization of the idle factors of production in the country”.

Head of Equity Research FBNQest Securities Limited, Tunde Abidoye stated: “I think that some of the assumptions are a bit aggressive.

“The oil production benchmark of 2.06 mbpd looks very ambitious given the current realized oil production level of around 1.3mbpd (ex-condensates), per NUPRC data.

“The exchange rate and GDP growth rate projections are also a bit optimistic given the current exchange rate is N1,650, and the strain on household wallets.

“However, although I think the oil price benchmark is realistic, there are potential downside risks arising from the anticipated ramp up of oil production by the US following President Trump’s victory at the polls”, he stated.

Also commenting, public affairs analyst/communications expert, Clifford Egbomeade said: “The proposed 2025 budget of N47.9 trillion, based on a $75 oil benchmark, 2.06 mbd production, and 4.6% GDP growth, sets ambitious targets given Nigeria’s economic climate.

“The oil production target assumes steady output levels, which may be impacted by infrastructure limitations.

“Moreso, the projected 4.6% GDP growth may be optimistic, as Nigeria continues to face high inflation, currency pressures, and unemployment.

“The budget includes N9.22 trillion in new borrowing, raising concerns about fiscal sustainability given the nation’s current debt servicing load.

“The assumed exchange rate of N1,400 per dollar suggests continued devaluation, which could intensify inflationary pressures.

“Achieving this budget will require effective fiscal reforms and greater economic diversification to meet revenue and growth targets”, he stated.

Dr. Bala Zakka, an energy analyst said: “Oil market is very volatile and absolute caution should be taken in the process of taking the benchmark price for the 2025 budget”.

On output, he said: “The federal government said it is currently producing 1.8 million barrels per day, including condensate.

“Like in the case of price, adequate caution should also be taken here.

“I strongly believe that stakeholders, including the government and investors should work harder to further increase the nation’s capacity to produce oil and gas.

“The Gross Domestic Product, GDP, is all about the production of goods and services in an economy.

“With constant power supply disruptions, it has not been possible for households and businesses to participate in the economy.

“It is very doubtful if they will be able to increase investment to produce goods and services in 2025”.

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