Unpacking Nigeria’s 2025 spending plan

Nigeria’s proposed 2025 spending plan has raised concerns and sparked conversations among experts and policymakers. With debt servicing pegged at 14.3 trillion naira, a fiscal deficit of 13 trillion, and a deficit to GDP ratio of 1.5 per cent, questions arise regarding the feasibility of this budget to support GDP growth forecasts. Iniobong Usen, Head of Research at Budgit, shed light on the intricacies of the spending plan and its economic implications in a recent interview with CNBC Africa. Usen highlighted the significant size of the budget, which has been a point of discussion. While nominally the largest in Nigeria's history, when benchmarked against the dollar due to currency devaluation, its value may not be as impressive. This juxtaposition shows the complexities of assessing the budget's true impact on the economy. Regarding the budget process, concerns were raised about the late passage and deviations from the January to December budget cycle. Usen pointed out the setbacks in recent budget cycles, emphasizing the importance of timely budget preparations and adherence to fiscal timelines for effective planning and resource allocation. Usen delved into the revenue projections, questioning the realism of projections, particularly in the oil sector. With crude oil still dominating foreign exchange earnings, production shortfalls and encumbrances from resource-backed lendings cast doubt on the feasibility of achieving revenue targets, such as the projected 19 trillion naira from the oil sector. Debt servicing emerged as a major challenge, surpassing capital allocation in the 2025 proposal. Usen highlighted the strain debt servicing puts on government revenues, especially with a wage increase draining resources. The balance between necessary expenditures, debt servicing, and capital investments remains a critical issue that could impact infrastructure development and policy initiatives. Usen underscored the importance of efficiently allocating resources and involving the private sector to bridge infrastructure gaps. He raised concerns about undisclosed expenditures outside the budget, potentially undermining the budget's credibility and diluting allocations to essential services. In conclusion, Usen emphasized key performance indicators for Nigerians to monitor the budget's success, focusing on investments in education, healthcare, and security. Improved spending in these sectors would demonstrate tangible benefits to citizens and signal progress in key areas affecting the populace. As Nigeria navigates the challenges and implications of its 2025 spending plan, stakeholders are urged to monitor the budget's execution closely, holding the government accountable for strategic resource allocation and effective policy implementation.