Nigeria is aiming to spend a record N47.9 trillion in the 2025 fiscal year, but the budget is the lowest since 2020 in dollar terms, according to BusinessDay’s analysis.
The proposed budget is premised on the assumption of an ambitious oil price of $75 per barrel and target production of 2 million barrels per day.
However, with the prevailing exchange rate of $1/N1, 679, the budget translates to $27.96 billion, a 22.27 percent drop from the 2024 budget of $35.97 billion benchmarked at N800/$1.
When N1,400/$ is used to compute the budget, the value rises to $34.14 billion but still lower than the 2023 budget of N21.83 trillion which stands at $50.11 billion at an exchange rate of N435.57/$.
Read also: Economists urge FG to lower 2025 budget oil price benchmark to $70p/b
The proposed budget is targeted at bringing succor for the estimated 129 million poor Nigerians and providing employment opportunities for several citizens. But it lags the 2022 budget of N17.126 trillion at $39.8 billion with an exchange rate of N410.15 per U.S. dollar.
Taiwo Oyedele, Nigeria’s head of fiscal policy and tax reforms, recently said the country is “running on a low budget” compared to its size, emphasising that meaningful development may be far from achieving if this continues.
He stated that while Kenya and South Africa, which are not up to half of Nigeria’s population if combined, spent $32 billion and $130 billion respectively on their citizens last year, “the narrative of our country cannot be changed by increasing that amount by 5 percent or 10 percent. The base is just too small. It cannot fund our development.”
Nigeria lags peers
Meanwhile, Egypt, the largest Arab country with about half the population of Nigeria, will be spending $82.89 billion on its citizens in 2025, a fall from $97.41 it budgeted the previous year.
Nigeria’s budget also doesn’t come close to Algeria’s proposed $127.6 billion, which is the largest since its independence in 1962.
The third largest economy in Africa has just 46 million people but its spending is about four times more than Nigeria’s with about 230 people.
Low in real terms
“In nominal terms, the 2025 budget is the biggest naira value budget in Nigeria’s history. However, in terms of real purchasing power at constant U.S. dollars, this budget is the lowest since 2018,” said Adeola Adenikinju, president of the Nigerian Economic Society (NES).
“This nominally bloated 2025 budget expenditure figure is as a result of high inflation and significant naira depreciation,” Adenikinju added.
Since President Bola Tinubu assumed office last year, he has sparked a raft of reforms from ending the subsidy regime to floating the currency in a bid to make foreign exchange more market-driven and attract investors.
But the reforms have led to a steep decline in the currency which has shed over 70 percent of its value since the reforms began last June.
Critics say Nigeria put the cart before the horse by floating the currency before securing significant dollar inflows. The consequences are far-reaching for the government, businesses and even households.
Read also: Nigeria 2025 budget is the lowest since 2018, economists say
Why does dollar comparison matter?
Many critics have argued that Nigeria is a naira-denominated country and shouldn’t be bothered about converting its budgetary spending in dollar terms.
While this may be partly true, Nigeria’s economic growth is driven by the petrodollar and the external debt financing, which give rise to high external sector vulnerabilities and dollar-denominated debt obligations.
“Dollar comparison is necessary in view of the external sector dominance of the Nigerian economy, an import-dependent primary production economy,” the NES said in a recent statement.
Available data show that between January and October 2023, Nigeria spent 50 percent or $3.07 billion of its total external inflows of $6.11 billion for external debt servicing. The nation’s total external debt stood at N31.98 trillion (US$41.59 billion) as at Q3 2023.
Total imports were $56 billion against total exports of $60.7 billion. This gives net inflows of $4.7 billion, out of which $3.07 billion was used to service debt by October.
Nigeria’s government expenditure to GDP ratio dwarfs among peers
A further probe of the proposed spending shows that while total expenditure of N47.9 trillion ($34 billion) in the 2025 budget represents a 64.39 percent nominal increase over the 2024 budget of N28.7 trillion ($31.9 billion), Africa’s fourth largest economy will be spending a paltry 20.52 percent of its nominal GDP of N229.912 trillion.
This is lower than South Africa’s 33 percent to GDP with 60.41 million people; Ghana’s 27.5 percent for a country with less than 35 million citizens; and Egypt’s 25 percent in the last few years.
A low average government expenditure to GDP ratio means that a country is spending a relatively small proportion of its total economic output on government activities and services. It is a key indicator of how much of the nation’s wealth is being allocated to government functions, including public services, infrastructure, defense, healthcare, education, and welfare.
Read also: Will Nigeria’s 2025 budget deliver or disappoint?
Higher budget in naira, weaker per capita expenditure
The budget, though the highest the country has seen in naira terms, is low in per capita measure. The 2025 budget shows that each Nigerian is entitled to a pittance of about $148.39.
BusinessDay reported that the country’s income per head is at a 20-year low of about $900, but a shrinking budgetary allocation means meaningful development and poverty alleviation may be a far cry.
“The U.S. State of California budgeted nearly $300billion for 40 million people for its 2025 budget, translating to per capita expenditure of $7,500 per person annually, and Nigeria is doing $28.18 billion for its 230 million people, which implies $115.4 expenditure per Nigerian for 2025,” Adenikinju said.
“While we cannot be California overnight, we noted that Nigerians buy petrol, medicals, security, construction and other equipment at the same global market prices as Californians,” he further said.
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