N54tn Budget Update: What You Need to Know About Federal Government Spending Changes

Following the Federal Government's decision to raise the 2025 Appropriation Bill from N49.7 trillion to N54.2 trillion on the basis of increased income from important government agencies, some stakeholders in the Nigerian economy have expressed differing opinions.

On the Senate floor on Wednesday, letters from President Bola Tinubu outlining the changes to the budget that has not yet been approved were read.

In separate letters to the Senate and the House of Representatives, the President communicated the budget adjustment. Senate President Godswill Akpabio read the letters during Wednesday's plenary.

In November, Tinubu gave the National Assembly an N49.7 trillion budget proposal with the subject "Budget of Restoration: Securing Peace, Rebuilding Prosperity."

Based on increased non-oil revenue production, the Federal Government anticipates N36.35 trillion in total revenue in 2025. Along with oil revenue estimates based on a crude oil benchmark of $75 per barrel, a production target of 2.06 million barrels per day, and an exchange rate of N1,500 per USD, this also includes increased tax revenues, customs duties, and independent revenue from government-owned businesses.

While aiming for a budget deficit of N13.39 trillion (3.96 percent of GDP), the overall expenditure of N49.7 trillion includes sizeable contributions to vital sectors. Both external and domestic borrowings, together with creative public-private partnership options, will be used to cover this deficit.

According to Tinubu, N1.4 trillion in new revenue from the Federal Inland Revenue Service, N1.2 trillion from the Nigeria Customs Service, and N1.8 trillion from other government organizations were the main drivers of the increase. After the letter was read, Akpabio forwarded the President's request for immediate consideration to the Senate Committee on Appropriations.

Additionally, he gave lawmakers his word that the budget will be completed and approved by the end of February.

The request to enhance the budget proposal to additional money generated by important government agencies was made by President Tinubu in a letter read on the Senate and House of Representatives floors the same day.

The increase, according to the Federal Government, would also help its diversification drive by increasing investments in infrastructure and the solid minerals industry.

This was revealed to reporters by Atiku Bagudu, Minister of Budget and Economic Planning, when he dropped President Bola Tinubu off at the Nnamdi Azikiwe Airport in Abuja on his way to France.

Tinubu requested an extra N4.5 trillion for the 2025 Appropriations Bill under consideration by the National Assembly in a letter dated February 3, 2025, addressed to Tajudeen Abbas, the Speaker of the House of Representatives.

Bagudu gave an explanation of the adjustment's justification, stating that it was determined that government-owned businesses, such as the Nigeria Customs Service, could increase their earnings.

"As you may remember, the National Assembly received the N49 trillion budget from the President, and legislative work began," he stated.

"Interactions between the National Assembly and the executive continued the legislative effort. All data were still being questioned by the Economic Management Team and the National Assembly.

"The Federal Inland Revenue Service confirmed that we can do more than was submitted, and the Senate Committee on Appropriation, Senate Committee on National Planning, and Senate Committee on Finance established that we can generate more revenue by tasking all the institutions to do more."

"Equally, it was established that the Customs Service and government-owned enterprises could contribute more revenue," he continued.

Thus, more than N4.5 trillion in new money was generated and presented to the president.

"And advised that this additional revenue be utilized further to support the diversification program by investing more in infrastructure projects and the solid minerals sector, as well as to strengthen the Bank of Industry and the Bank of Agriculture."

Marcel Okeke, a sustainability specialist and economist, criticized the administration for the last-minute raise.

He was concerned that the budget, which was supposed to take into effect on January 1, 2025, was still undergoing the legislative process with modifications made by the FG.

He remarked, "You rush to bring these adjustments if the government was talking about a supplemental budget at any point during the year; that is a different matter than within one or two months." It's good, but waiting and creating an additional budget would have been the right course of action. If the budget itself had taken effect on January 1, 2025, and been rounded off at the appropriate moment, everything would have been in order. Not in this case, where they are adding things as they go along.

That isn't how you manage a nation. I can assure you that the statistics they published in December have been distributed globally.

Based on those numbers, the world has begun taking all the actions it desires to take with, for, and about Nigeria. We are discussing institutions, and those numbers have been used by analysts worldwide. You might not realize how serious this move is. People may be applauding that FG spotted extra money and brought it because of the current atmosphere, but it is not how a budget should be done. Who is to guarantee they won't return before the National Assembly completes the task? In my opinion, they ought to have waited and developed an additional budget.

Paul Alaje, Chief Economist and Partner at SPM Professionals, expressed concerns about how the higher spending will affect the federal government's 15% inflation objective.

"I think it is straightforward," Alaje stated. The first is that FG is saying that we may spend more because some government entities are suddenly making more money. Additionally, I believe the true reason is that the administration felt it was necessary to include some projects that had been left out of the 2025 budget.

"These are some of the reasons why the government is increasing the budget for 2025, but you should be aware that the government's projection of 15% inflation may still be a pipe dream given the size of the economy."

According to Tunde Amolegbe, managing director of Arthur Steven Asset Management Limited, this is a positive move that would allow for the expansion of infrastructure.

Before we can even consider moving toward a productive economy, we must first rebuild our woefully inadequate infrastructure, which is why I have always supported an ambitious budget, he said. If you look at our budget on a per capita basis, we are far less than nations with comparable population and age distributions. Given that the government isn't investing enough to improve people's quality of life, how can we expect to help our people escape poverty?

In order to avoid tipping into over-leveraged area, Amolegbe, a former president of the Chartered Institute of Stockbrokers, emphasized the importance of "keeping our eye on ratios such as debt-to-revenue and debt-to-GDP."

Speaking on condition of anonymity, a prominent economist criticized the budget plan rise, claiming it would make the economy worse.

"Why would the government raise the budget when its deficit is approaching N16 trillion?" he said. The economy is suffering as a result of the deficit. The government should have just cut the deficit instead of borrowing so much money here and there. By the way, how can we be certain that the government would even produce the amount that has been allocated?

The House of Representatives, meantime, has endorsed President Tinubu's request to the National Assembly to raise the 2025 budget plan from N49.7 trillion to N54.2 trillion, claiming that the rise is the result of higher revenue from important government agencies.

Senate President Godswill Akpabio and House of Representatives Deputy Speaker Benjamin Kalu, who oversaw plenary sessions in the Red and Green Chambers on Wednesday, respectively, read the letter on the Senate floor and the House of Representatives before forwarding it to the Committees on Finance and Appropriations for prompt review.

Nigerians were reassured by the Senate President that the 2025 budget proposal would be approved by the end of February.

Akin Rotimi, the House of Representatives' spokesperson, said that the house had a procedure for dealing with these kinds of petitions.

Legislative procedures are in place for this and similar issues. The House Committee on Appropriations has been tasked with taking additional legislative action on the executive proposal, he stated.

"The House of Representatives welcomes the President's proposal to revise the 2025 budget, which seeks to increase the allocation to ?54.2tn," said Philip Agbese, the deputy spokesman for the House. This audacious action, which was motivated by more revenue from important government departments, shows the administration's dedication to reviving the economy and enhancing Nigerians' quality of life.

He pointed out that the country's path to food security will be greatly aided by concentrating on vital industries, especially agriculture.

As we examine the proposal's specifics, we're especially delighted by its emphasis on key industries like agriculture, which would benefit greatly from the funding infusion into the Bank of Agriculture. This program might improve food security, encourage rural development, and empower our farmers.

Additionally, we took note of the proposal's focus on strengthening national security, namely the building of barracks for our military. The administration's commitment to safeguarding our country and its people is demonstrated by this investment in the infrastructure and well-being of our armed forces.

"We will remain guided by our commitment to ensuring that every naira is allocated efficiently, effectively, and in the best interests of Nigerians as we begin our scrutiny of the proposal," Agbese promised.