The recent passage of the 2025 Appropriation Bill by the National Assembly, a colossal N54.99 trillion budget, has ignited concerns among economic experts regarding its potential inflationary impact. The sheer scale of the budget, coupled with significant allocations for debt servicing (N14.32 trillion) and recurrent expenditure (N13.64 trillion), raises questions about the government’s ability to manage its finances effectively while pursuing its development goals. Economists warn that such expansive spending could exacerbate inflationary pressures, undermining the government’s own inflation target of 15 percent for 2025. This concern stems from the basic economic principle that increased spending without a corresponding increase in productivity can lead to a rise in the general price level. The government’s ambitious spending plans, while potentially beneficial for infrastructure and social programs, carry the risk of overheating the economy and further eroding purchasing power.
One of the primary anxieties surrounding the budget is the potential for increased borrowing to finance it. While the government has made efforts to reduce debt service to revenue ratios, the sheer magnitude of the budget suggests that significant borrowing will be necessary. This reliance on debt financing poses a risk to fiscal sustainability and could further burden future generations. The initial budget proposal was N49 trillion, which was later revised to N54.2 trillion and finally passed at N54.99 trillion. This upward trajectory in budget size without a corresponding increase in projected revenue streams raises serious concerns about the government’s ability to fund its ambitious plans without resorting to excessive borrowing or compromising other critical areas of expenditure.
The rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS) further complicates the inflation outlook. The rebasing aims to adjust the weights assigned to different components of the CPI basket, potentially reducing the influence of food inflation on the overall inflation figure. However, economists argue that this technical adjustment does not address the underlying drivers of inflation and may create a misleading picture of price stability. While the rebasing might result in a numerically lower inflation rate, the actual prices of goods and services in the market may remain high, thereby impacting the cost of living for ordinary citizens. Therefore, addressing inflation requires tackling the root causes, such as supply chain disruptions, production bottlenecks and excessive money supply growth, rather than merely manipulating statistical indicators.
The effectiveness of the budget hinges on the government’s ability to generate sufficient revenue to finance its ambitious expenditure plans. Given the significant gap between projected revenue and planned spending, there is a substantial risk of the government resorting to deficit financing, which could exacerbate the debt burden and potentially crowd out private investment. Furthermore, the large allocation for recurrent expenditure raises concerns about fiscal efficiency and the need for greater prudence in managing government operations. A significant portion of recurrent spending is dedicated to salaries and overheads, leaving less room for investments in critical sectors that could stimulate economic growth and job creation.
Experts emphasize the importance of private sector involvement in the successful implementation of the budget. Public-private partnerships can leverage the expertise and resources of the private sector to accelerate infrastructure development and improve service delivery. By engaging the private sector, the government can share the financial burden of large-scale projects and ensure greater efficiency in project execution. Moreover, private sector participation can bring innovation and best practices to the public sector, leading to improved outcomes and enhanced value for money.
In conclusion, the 2025 Appropriation Bill presents both opportunities and challenges for the Nigerian economy. The increased capital allocation holds the promise of much-needed infrastructure development. However, the sheer size of the budget, coupled with substantial allocations for debt servicing and recurrent expenditure, raises concerns about fiscal sustainability and the potential for inflationary pressures. The government must prioritize fiscal prudence, enhance revenue generation efforts, and actively engage the private sector to mitigate these risks and ensure the successful implementation of the budget for the benefit of all Nigerians. A careful balancing act between ambitious spending plans and prudent fiscal management will be crucial for achieving sustainable economic growth and improving the living standards of the population.
