Nigeria’s 2025 budget stands at a juncture between ambition and reality. On paper, the fiscal document seeks to address the nation’s pressing needs, from infrastructure to social investments. However, beneath the surface of that optimism lies a troubling set of assumptions and economic headwinds that question its sustainability.
One may wonder what this means, especially at a time when the federal government has consistently boasted about raising more revenue, even as the Federation Account Allocation Committee (FAAC) continues to share higher allocations among the three tiers of government, particularly the State governments, with N2.2 trillion shared in August. But it is all money illusion!
In February this year, President Bola Tinubu signed into law the N54.99 trillion 2025 Appropriation Bill. The 2025 budget included projections for Gross Domestic Product growth of 3.68 percent, an inflation rate of 15 percent, a foreign exchange rate of N1,500/$1, crude oil production target of 2.06 million barrels per day with a benchmark price of $75 per barrel.
It is worth noting that the 2024 budget is also running concurrently with that of 2025 and is expected to end by December. The implementation of the capital expenditure component of the 2024 budget is now at 88 percent, and from all indications, the 2025 budget implementation may also extend to 2026.
The component of Nigeria’s annual budget includes: recurrent expenditure, debt service, and capital expenditure. While presently, the recurrent expenditure and debt service obligations are being met to a large extent, the real challenge lies with the capital expenditure component.
The central challenge of the 2025 budget revolves around unrealistic revenue projections, a mounting debt burden, rising interest rates, and a lack of focus on growth-enhancing projects.
Indeed, while the last two years have witnessed notable improvements in revenue mobilisation, particularly non-oil revenue, which has climbed by over 40 percent between January and August 2025, as has been trumpeted by President Tinubu and his supporters, the country’s ballooning debt stocks have continued to overshadow this achievement.
Nigeria’s debt service payment is tied to bond yield, which, in more than one year, has gone up significantly. Debt commitments have spiraled, as interest rates have risen dramatically from an average of 18 percent to about 27.5 percent in 2024 and have remained elevated in 2025. This means every new round of borrowing comes at a higher cost, crowding out funds for essential services.
Notably, in 2023, Nigeria’s debt more than doubled following the conversion of the ways and means advances under the late former President Muhammadu Buhari into bonds. While this presented temporary relief, it further heightened the country’s debt obligations.
In the domestic economy, it is also not rosy, due to the surge in borrowing costs as yields on government securities have jumped by nearly one-third, rising from an average of 13 percent in 2023 to about 18 percent since 2024. The devaluation of the naira further compounded the problem, as it has also led to an inflated cost of servicing dollar-denominated loans.
As highlighted earlier, the 2025 budget is pegged on an oil benchmark of $75 per barrel, yet average oil prices have consistently fallen below this threshold. In fact, Brent crude price eased yesterday, settling at $67 per barrel, as traders remained worried about the United States economic outlook after the Federal Reserve cut interest rates for the first time this year. At a time when global oil markets are volatile due to geopolitical tensions and Donald Trump’s tariff policies, Nigeria’s optimism appears misplaced.
The challenge with the 2025 budget was even brought to the fore on Thursday, when the National Assembly requested the federal government to immediately withdraw all circulars already issued for contract awards under the 2025 fiscal year.
The directive by the National Assembly was jointly adopted by the Senate and THE House Committees on Appropriations after a meeting with President Bola Tinubu’s economic team at the National Assembly.
The move came a day after the House Appropriations Committee first took a similar decision during an interactive session with the government’s fiscal managers on the implementation of the 2024 and 2025 budgets.
The Chairman of the Senate Committee on Appropriations, Senator Solomon Olamilekan Adeola (Ogun West), who read the resolution at the joint session said: “Capital component of the 2024 budget will continue till December 31st, 2025. The implementation of the capital component of the 2025 budget will commence as soon as possible, as the Authority to Incur Expenditure (AIE) should be issued within seven days after this session with the economic team.
“Circulars issued by the Ministry of Finance to the MDAs should be withdrawn pending issuance of AIE.”
In plain English, what the above directive from the lawmakers means is that while considering the scarcity of resources, the federal government has chosen to prioritise spending on growth-enhancing projects, but members of the National Assembly are more concerned with ensuring that a huge chunk of their constituency projects inserted into the budget are funded.
Recall that civic tech organisation, BudgIT Nigeria, had revealed that it uncovered over 11,000 projects worth N6.93 trillion inserted by the National Assembly in the 2025 budget, which underscored growing concerns about transparency and fiscal discipline. BudgIT had then described the development as a deeply entrenched culture of exploitation and abuse, which it had alleged was led by top-ranking members of the National Assembly as a means of frittering public funds meant to support national development.
Certainly, the cumulative effect of unrealistic revenue projections and unsustainable debt is the rolling over of budget cycles, where deficits from one year spill over into the next. Rather than functioning as tools of national planning, Nigeria’s budgets appear to have become instruments of debt accumulation.
Rising debt service obligations leave little fiscal space for the government to invest in education, health, infrastructure, and technology, and other projects that positively affect the citizens. This suppresses productivity, limits job creation, and undermines the very growth Nigeria needs to break free from its fiscal quagmire.
Therefore, unless bold reforms are undertaken, Nigeria risks perpetuating a cycle of fragile budgets that serve more as political instruments than genuine roadmaps for development. The government must rationalise expenditure by ensuring that every naira spent contributes directly to productivity and growth. Wasteful spending on constituency projects and non-essential items must give way to investments in human capital, infrastructure, and innovation. Going forward, borrowing should be tied strictly to projects that generate economic returns capable of repaying those debts. Borrowing to finance recurrent expenditure must also be avoided.
Finally, members of the National Assembly must stop seeing the budget as a tool to serve vested interests and pork-barrel spending, but to drive productivity and achieve inclusive growth. Wasteful spending on constituency projects and non-essential items must give way to investments in critical infrastructure and high-impact expenditure.
By Obinna Chima @ThisDay
