2025 proposed budget: Concerns, nuts and bolts

As required by the 1999 Nigerian Constitution, President Bola Ahmed Tinubu on 18th December 2024 performed a crucial aspect of the annual budget ritual when he laid before a joint session of the National Assembly the 2025 budget proposals with an aggregate expenditure of N49.7 trillion and a projected N13.4 trillion deficit which is nearly […]

As required by the 1999 Nigerian Constitution, President Bola Ahmed Tinubu on 18th December 2024 performed a crucial aspect of the annual budget ritual when he laid before a joint session of the National Assembly the 2025 budget proposals with an aggregate expenditure of N49.7 trillion and a projected N13.4 trillion deficit which is nearly 4% of GDP.

The budget priorities reflect its title with the lion’s share going to defence/security (N4.91 trillion), infrastructure (N4.06 trillion), education (N3.52 trillion) and health (N2.48 trillion). The key parameters adopted for the 2025 ‘Budget of Restoration: Securing Peace, Rebuilding Prosperity’, include crude oil price of USD75 per barrel and oil production of 2.06 million barrels per day.

On the back of the expected reduction in importation of petroleum products alongside increased export of finished petroleum products, bumper harvests enabled by enhanced security as well as increased foreign exchange inflows, the budget projects inflation will moderate to 15% in 2025 while the naira will appreciate to N1,500 per US dollar.

As lawmakers consider the 2025 budget proposals presented by the president, the contents must be properly interrogated before the appropriation bill is passed. A major snag to a thorough interrogation of the bill is its late presentation to the National Assembly.

Much as Section 81 of the constitution allows the president the liberty to lay the Appropriation Bill at any time before the commencement of the next financial year, it goes without saying that late submission of the budget bill makes it difficult for the National Assembly to undertake proper scrutiny of the proposals and so the approval process is hamstrung by the limited time available for debate.

Extant literature supports the fact that the timing of the submission of budget proposals significantly affects the quality of analyses and deliberations by the legislature. As a rule of thumb, a national legislature requires a minimum of three months for effective consideration of the annual budget estimates. Regrettably, this has not been the practice in Nigeria over the years.

To help close this identified gap in the budget process, I submit that a budget law is required similar to the US Congressional Budget Act of 1974 which lays out a formal framework for developing and enforcing a “budget resolution” to guide the budget process.

The envisaged budget law should provide a timetable for the various budget stages; strengthen a nonpartisan National Assembly Budget Office to aid in budgetary information and planning as well as encourage stronger collaboration between the various stakeholders.

Such a law should ensure that, like the general bills, the Appropriation Bill is subjected to public hearing. Indeed, the review of the budget bill by the National Assembly provides a major opportunity for public scrutiny and civic engagement in respect of any concerns the public may have.

I have a concern that the 2025 budget will most likely witness a high level of off-budget funds thereby masking the true picture of the government’s fiscal position. Although recurrent (non-debt) spending has made provision of circa N846 billion for the new minimum wage-related adjustments, it is doubtful if this amount will be sufficient to accommodate the attendant bailouts to the subnationals by the federal government in support of the implementation of not only the new national wage floor but also agreements with various labour unions including those of universities given the paltry balance in the Excess Crude Account.

These potential off-budget funds are capable of undermining the government’s plan to progressively reduce deficits and borrowings over the medium term. For the 2025 budget not to run into a major hitch, it is important that, as much as possible, all claims on public financial resources are identified and reconciled within the framework of the budget possibly incorporating potential investment income from restructuring of MOFI as well as positive impact of expected tax reforms to fund such claims if the oil revenue projections do not materialise.

A related concern I have is the financing of the N13.4 trillion deficit in which asset sale/privatization proceeds will contribute a mere N312 billion, while N3.8 trillion represents multilateral/bilateral project-tied loans. The bulk of the borrowings (N9.3 trillion) will be largely discretionary and non-project-tied.

In order not to compound the already huge debt burden the country is facing, every effort should be made to ensure that all long-term funds sourced from the debt capital market are tied to self-liquidating projects.

The budget breakdown, contained in the executive proposal, is meant to provide the nuts and bolts that will facilitate budget implementation and control. Besides the concern that the financing of the deficit raises, there are equally other weighty issues that deserve scrutiny by the National Assembly. For example, a thorough review of the line items that make up service-wide votes and capital supplementation can free up significant funds that can be channelled to other critical areas such as agriculture and solid minerals. For instance, the National Assembly should interrogate the composition and rationale for the ‘margin for increase in costs and recurrent adjustment (N12 billion) as well as the line item tagged ‘contingency recurrent’ (N36 billion).

Curiously, the same figures appeared under service-wide votes in 2024. Equally, under capital supplementation is a line item known as ‘contingency capital (N200 billion) which also featured in the 2024 budget for the same amount. The opaque description of these items as well as their presentation calls for closer scrutiny.

In the same vein, a situation in which projects are merely listed as ‘ongoing’ without stating the completion target expected in 2025 leaves much to be desired. For example, listed under the Ministry of Transport as ‘ongoing’ are 10 projects for which the sum of N42 billion is earmarked. These include the completion of the Abuja-Kaduna railway project; Lagos-Ibadan and its associated additional works; rehabilitation of Itakpe-Ajaokuta rail line and ‘construction of 12 Nos station buildings and track laying works at railway ancillary facilities areas Agbor’.

Others include the ‘installation of signal and telecommunication system on Itakpe-Ajaokuta-Warri railway line, installation of acoustic sensing security surveillance system for the Abuja (Idu)-Kaduna and other security gadgets’, as well as completion of feasibility studies for new standard gauge rail lines.

To see the shortcomings in this presentation, most of these projects also featured in the 2024 budget breakdown where a provision of N33 billion was made. Even the ‘feasibility studies for new standard gauge rail lines’ listed as completed in the 2024 budget also appear to be completed in the 2025 budget! Besides, the document was silent on the completion stages of these projects and did not indicate how much each of these projects would cost. This sort of narrative does not allow for a correct assessment of progress made in the projects’ execution.

The same presentation flaw is observed in projects listed under the Ministry of Works in the 2025 budget where about N290 billion has been allocated for the rehabilitation/repair of roads. For example, the sum of N1 billion each has been provided for the ‘ongoing’ construction of Rijiya Gusau Road in Zamfara State and Nsukka-Obollo-Afor-Ehamafu-Nkalagu Road in Enugu State.

It stands to reason that long-term projects such as roads or railways spanning several years should first be included in a country’s perspective plan (or at least medium-term plan) indicating timelines and then each year, the annual budget draws from it showing (preferably in kilometres as opposed to ‘sections’) achievable targets. This renders the use of “ongoing” a poor indicator to have in an annual budget. It bears repeating that for the budget information to discipline fiscal actions, it must be transparent. This demands the avoidance of the use of opaque and arbitrary language to enable the electorate to verify the budget information as well as monitor performance. A good example is specifying road or rail projects in terms of kilometres to be attained. Without such numbers, it is difficult for the populace to hold the government accountable.

In order to ensure that resources are properly allocated, MDAs with large overheads relative to total spending such as the Ministry of Budget and Economic Planning (N1.3 trillion), National Rural Electrification (N1.3 trillion), Nigerian Electricity Liability Management Ltd (N680 billion) among others, should be made to provide reasons why such disproportionate overheads should not be considerably slashed.

It is cheering to note that the FG’s total independent revenues are expected to increase from N1.9 trillion in 2024 to 3.5 trillion in 2025 largely on account of the expected increase in operating surplus to N2.6 trillion from N1.1 trillion last year. Similarly, an increase in dividends expected from NLNG is projected to grow to N727 billion from N346 billion last year. But projected dividends from Bank of Industry (N4.7 billion), Development Bank of Nigeria (N2.6 billion) and Bank of Agriculture (nil) are lower than the previous year. This calls for a review of the yearly allocation of N10 billion for recapitalization of DFIs as this amount is grossly inadequate to even attract private sector interest.

By the same token, I think the Ministry of Solid Minerals Development deserves more than the N16.7 billion earmarked for it in 2025. Over the years, this ministry has remained the leprose finger among the five key agencies that generate revenues for the Federation Account namely the NNPCL, Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS), and Ministry of Mines & Steel Development (MMSD). This may not be unconnected with poor funding of the sector- one with the potential for export base diversification.

All said the Minister of Budget and his team deserve commendation for preparing the 2025 budget proposal, especially against the backdrop of the fact that a new Director General for the Budget Office assumed duties not too long ago. To provide a major opportunity for public scrutiny and civic engagement as well as facilitate a thorough interrogation of the 2025 budget estimates, the National Assembly should ensure that the 2025 Appropriation Bill is subjected to public hearing. By providing a platform for open discussion on the budget, the lawmakers will be helping to broaden public debate on budget priorities.

 

Uche Uwaleke is a Professor of Capital Markets and Director of the Institute of Capital Market Studies at Nasarawa State University Keffi