What Tinubu’s N54.6 trillion budget means for economy

President Bola Tinubu on Wednesday wrote to the National Assembly requesting an increase in the 2025 budget from N49.7 trillion to N54.6 trillion.

If the Senate approves his request, it will mark a 9.77 percent rise in government-proposed spending in 2025.

“It is an expansionary budget which can trigger economic growth but also inflation, if not well managed,” Ike Ibeabuchi, an Abuja-based emerging markets expert, said.

“The money for the budget needs to be raised from productive activities so as to avoid a further rise in inflation.”

The purpose of an expansionary fiscal policy is to stimulate aggregate demand and compensate for shortfalls in private demand.

Tools such as increased government spending—particularly on infrastructure—tax cuts, and transfer payments are often deployed to achieve this.

Taiwo Oyedele, chairman of the Presidential Fiscal Policy and Tax Reforms Committee, had also argued two weeks ago that the 2025 budget cannot stoke inflation. He said this when the annual budget was N49.7 trillion.

“You only stoke inflation from the fiscal side if you inject new money,” Oyedele explained.

He emphasised that spending on productive activities, funded through taxes, resource revenue, or borrowing (not from the central bank), has a muted impact on inflation.

Read also: Tinubu seeks Senate approval to raise 2025 budget to ₦54.6tn

To illustrate his point, Oyedele pointed to Nordic countries like Denmark, Norway, and Sweden, which spend 40-50 percent of their GDP annually without experiencing runaway inflation.

“The N50 trillion budget will not stoke inflation,” Oyedele asserted.

Where is the money coming from?

Senate President Godswill Akpabio recently clarified that the proposed budget increase is backed by additional revenue generated by key government agencies last year. He said the Federal Inland Revenue Service (FIRS) contributed N1.4 trillion last year, the Nigeria Customs Service (NCS) generated N1.2 trillion, while other government-owned agencies accounted for N1.8 trillion. This suggests that the expansionary policy is not reliant on printing new money, which therefore minimises inflationary risks.

What does this mean for economy?

The impact of this budget hinges on how the additional N4.86 trillion is allocated.

“If channelled into infrastructure development such as roads, power, and healthcare, it could spur economic growth, create jobs, and improve living standards. However, if the funds are diverted to recurrent expenditure or frivolous travel expenses, the benefits will be negligible, and public trust could erode further,” one Lagos-based senior economist at a financial institution said.

The additional revenue from FIRS and NCS raises questions about tax collection efficiency. Are these agencies expanding the tax base by capturing more Nigerians in the tax net? If so, it could mean more citizens and businesses will bear the burden of funding the budget, experts say.

Currently, Nigerian companies pay one of the highest corporate income tax rates globally at over 30 percent, though a proposed tax reform bill aims to reduce this to 25 percent.

The bigger picture: Keynesian economics in action

Expansionary fiscal policy is rooted in Keynesian economics, which posits that insufficient aggregate demand leads to economic recessions. In Nigeria’s case, the success of this approach will depend on the prudent allocation of resources and transparency in implementation.

Read also: 2025 Budget to be transmitted to President soon – Akpabio

New budget proposal

In the letter read by Akpabio on Wednesday, Tinubu explained that the proposed increase is based on additional revenue generated by key government agencies.

Tinubu initially presented a N47.9 trillion budget last December, christened the ‘Budget of Restoration: Securing Peace, Rebuilding Prosperity.’

He said, “I am writing to inform you of the availability of additional revenue amounting to N4.5 trillion and to propose its allocation within the 2025 appropriation bill to enhance the budget’s responsiveness to the nation’s most pressing priorities and aspirations.”

The president detailed how the extra revenue will be spent, stating, “Solid Minerals will get N1 trillion; Bank of Agriculture Recapitalization, N1.5 trillion; Bank of Industry Recapitalization, N500 billion; Critical Infrastructure, N1.5 trillion; Military Barracks Accommodation for N250 billion; Military Aviation for N120 billion.”

Also included are irrigation development, N380 billion; transportation infrastructure, N700 billion; and border communities infrastructure: N50 billion.”

President Tinubu stated that no infrastructure, innovation, or progress could be sustained without security.

“The government has a constitutional obligation to secure lives and property. Military expenditure is not merely a fiscal decision—it is a moral imperative,” he noted.

He explained that by investing in the armed forces, the government aims to end terrorism, safeguard the dignity of Nigerians, and create a stable economic environment conducive to growth.

The budget, he assured, reflects not only the administration’s commitment to national security but also a vision for a prosperous and fear-free future.