Economic experts have cautioned that the passage of the N54.99 trillion 2025 Appropriation Bill by the National Assembly could lead to higher inflation. They urged fiscal and monetary authorities to prepare for the potential economic consequences of the expansive budget.
The National Assembly passed the budget on Thursday, allocating N14.32 trillion for debt servicing and N13.64 trillion for recurrent expenditure, which covers salaries, overheads, and government operations. The budget also includes significant capital expenditure aimed at infrastructure development.
Economists Raise Concerns
In exclusive interviews with Sunday PUNCH, economists highlighted the risks associated with the budget. Paul Alaje, Chief Economist at SPM Professionals, noted that the budget’s expansionary nature could drive inflation. “The revenue authorities will have to go the extra mile. If we truly spend all of this money, we should brace up for inflation in the coming period,” he said.
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The Federal Government has projected a 15% inflation rate for 2025, but Alaje expressed skepticism. “The government is looking to reduce inflation to 15%, but it is also planning to spend more. These two goals are not aligned,” he explained. He also raised concerns about the budget’s financing, noting that Nigeria may need to borrow more to meet its revenue shortfall.
Revenue and Debt Challenges
Alaje pointed out that while President Bola Tinubu has reduced the debt service-to-revenue ratio from 98% to 67%, the increased spending in the 2025 budget could push this ratio higher. “With this kind of spending, borrowing will likely increase, and so will the debt burden,” he said.
He also questioned the feasibility of achieving the revenue targets needed to fund the budget. “The budget has increased from N49 trillion to N54.99 trillion. Shouldn’t revenue points also increase proportionally?” he asked.
Rebasing of Consumer Price Index
Alaje commented on the recent rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS), stating that it may not significantly impact inflation. “The NBS aims to reduce the influence of food inflation, but commodity prices in the market remain the same. Adjusting numbers alone won’t control inflation,” he said.
Private Sector Involvement Crucial
Dr. Joseph Ogebe, Head of Research at the Nigerian Economic Summit Group (NESG), emphasized the need for private sector involvement in budget implementation. “The 2025 budget is the highest ever in nominal terms. The increase in capital allocation is a welcome development, but successful implementation requires private sector support,” he said.
Ogebe also highlighted the need to address Nigeria’s infrastructure gap and improve fiscal efficiency. “The high recurrent expenditure remains a concern. Efforts should focus on enhancing overall fiscal efficiency and increasing spending on social interventions to cushion the effects of ongoing reforms,” he added.
