Tinubu’s Budget Expansion Proposal Sparks Debate Among Experts
President Bola Tinubu has raised the proposed 2025 budget from N49.7 trillion to N54.2 trillion, citing additional revenues generated by key government agencies.
The president conveyed the budget adjustment in separate letters sent to both the Senate and the House of Representatives, which were read during Wednesday’s plenary by Senate President Godswill Akpabio.
Tinubu said the increase was driven by N1.4 trillion in additional revenue from the Federal Inland Revenue Service, N1.2 trillion from the Nigeria Customs Service (NCS) and N1.8 trillion generated by other government-owned agencies.
Akpabio clarified that the proposed budget increase suggested that the expansionary policy was not reliant on printing new money, which therefore, minimised inflationary risks.
Experts Divided Over New Proposition
Reacting to the announcement, Professor of Finance and Capital Market at the Nasarawa State University, Keffi, Uche Uwaleke said: “I think the reasons advanced for the increase in the 2025 budget size are cogent.
“The first thing to note is that the revenue generating agencies, especially the FIRS and the NCS surpassed their targets for 2024. Not recognising their full capacity in the 2025 estimates would introduce a slack in the 2025 budget.
“A tempting option to the use of the additional N4.5 trillion revenues projected for 2025 would be for reducing the fiscal deficit. But I think the huge benefits that will arise from its proper utilisation will by far outweigh any cost associated with deficit financing.
“This is why I consider as economically wise, the decision to use such funds to recapitalise and restructure the Bank of Agriculture and the Bank of Industry, as well as diversify the solid minerals sector and attend to critical infrastructure projects as enunciated.”
Uwalake further advised that any plan to strengthen development finance institutions should also include the country’s export credit agency, the Nigerian Export Import Bank (NEXIM).
Nothing Wrong With Raising Budget, Remains a Projection – Ajuwon
Another economist, Dr Oluseye Ajuwon, in a chat with Weekend Trust, said there was nothing wrong with the decision of the federal government to raise the budget.
Ajuwon, a lecturer at the African School of Economics (ASE), Abuja, said the budget remained a projection and the proposed expenditure was a function of expected incomes.
He said, “The decision to raise the budget is a function of income and expenditure. If the income is able to meet the expenditure, then expenditure will go ahead. If the income is not able to meet the expenditure, there is no problem. It is when income can meet the expenditure that you will go ahead with the expenditure. If the income is not enough, then the expenditure will hold on until there is income to meet it.
“I don’t know why people are making unnecessary hues about it. It is a projection.
“Even if we are borrowing money, one thing this current government is doing is this: if at all we are borrowing money, they ensure that it is sustainable. If it is something that is not going to be sustainable, they would not go into it.
“If not for the loan that is already on the ground, the money they are borrowing now is a responsible; that is a good thing about their borrowing.”
He said the additional budget should be seen as supplementary, even before the budget is passed, adding, “There is no difference in what they are doing now with a supplementary budget.’
Use Increased Revenue to Reduce Deficit – Chukwu
The Group Managing Director/Chief Executive Officer of Cowry Asset Management Limited, Mr Johnson Chukwu, however, argued that if the incremental revenue is actualised, it needs another N9 trillion to finance its deficit. Therefore, should the government stick with the current expenditure profile, it would reduce the deficit to N9 trillion.
He said some of the assumptions underlying the 2025 budget were unrealistic. “While we are projecting that the government will produce about 2.06 million barrels of crude a day, if you look at the last report, it states that the crude production in January declined by about 60,000 barrels a day. At the end of the third quarter of last year, we did an average of 1.4 million barrels a day. At the same time, we are projecting about $75 for a barrel of crude. As at today, it is below $74, and it is projected to drop with President Trump’s policies. This means that we are going to see a material increase in our deficit.”
He argued that an increasing deficit on the macroeconomic environment means that the country is going to see further heightening of inflation, further pressure on exchange rates; and these are not good for macroeconomic stability.
He said: “My take is this: The first thing you should do is to look at what they call N49.7 trillion and see how you can do better because the budget has not been approved.
“If there are critical expenditure heads, we should move money around before the budget is approved. But to further increase the expenditure when you are almost certain you are not going to achieve your projected revenue simply means that you are ab initio projecting further borrowing, which puts further pressure on government expenditure and revenue, which will further shrink the headroom. The government has to invest in critical infrastructure. “
Getting Value for Money
While proffering solutions for budget execution Chukwu said: “There are a lot of weaknesses embedded in our procurement process or policies. What we have seen over the years is that if the government executes a project and you give the same to the private sector, they will execute it at a much lower cost and a shorter time, with better outcome.
“So, there must be something wrong with our public procurement policies despite what we have done with the anti corruption agencies.
“Unfortunately, the National Assembly is supposed to provide oversight functions, but members are also integrated in the execution of projects through their constituency projects.
“Once you are involved in execution, you cannot be controlled. There’s something we say in control – you cannot initiate, approve and execute.”
He said the government should focus on creating a productive economy, explaining, “A productive economy will ensure that we produce more businesses. We will create value and increase gross domestic product (GDP). The government will generate more tax from that GDP and have more resources to achieve its objective.”
