The 2025 Appropriation Bill presented to a joint session of the National Assembly last week by President Bola Ahmed Tinubu is not a bumper budget as many have described it. The naira value is significantly larger than the N27 trillion budget approved by the National Assembly for 2024.
However, its dollar value pales into insignificance when compared to the 2024 budget. The 2024 budget was predicated upon an exchange rate of N460 to the dollar. The 2025 Appropriation Bill for obvious reasons is built around an exchange rate of N1,500 to the dollar. In simple arithmetics N27 trillion divided by N460 is higher than N47 trillion divided by N1,500. In dollar terms 2025 budget is less than 2024 budget.
Despite the seemingly insignificant dollar value of the bill, there are strong indications that the suffering in the land would reduce significantly in 2025 if the federal government implements the budget religiously.
Everything points to improved standard of living in 2025. One of the reasons for the optimism is that Nigeria has finally attained self-sufficiency in refined petroleum products and consequently will be saving the $20 billion it was spending annually on refined petroleum products imports.
If the Central Bank of Nigeria (CBN) monitors the foreign exchange market meticulously, the development in the downstream sector of Nigeria’s oil industry will reduce the demand pressure on the naira and allow the naira to appreciate significantly.
The savings from self-sufficiency in refined petroleum products will further be boosted by Nigeria’s entry into the prestigious global club of nations exporting refined petroleum products.
Even an industrialised nation like South Korea is now queuing at the Dangote Refinery to buy refined products. That development will automatically boost Nigeria’s inflow of foreign exchange and tackle the crippling supply deficit that had compelled the naira to stage a disorderly retreat in the foreign exchange market.
The naira will almost certainly appreciate except the CBN goes to sleep as a regulator and allow the criminals in the banking system to fritter away the expected bumper harvest in the inflow of foreign exchange.
Another factor that will improve the standard of living in 2025 is the attitude of foreign direct investors to the reforms by the Tinubu administration.
Foreign direct investors are beginning to see Tinubu’s reforms as a necessary evil on Nigerian people that will free funds for investment in decaying infrastructure and consequently reduce the cost of doing business in Nigeria.
They believe that the excruciating pains inflicted on Nigerians by the removal of petrol subsidy and floating of the naira will soon result in economic boom when government is able to invest significantly in infrastructure rehabilitation.
The result of the new assessment is that foreign direct investment inflow into Nigeria has improved considerably and may be better in 2025. Five multinationals fled Nigeria in 2024 because of high cost of production and depletion of the naira purchasing power by inflation which drastically reduced patronage. Many more may enter the country in 2025.
That will result in greater inflow of foreign exchange, creation of more jobs and reduction of poverty.
One thing that economy watchers are worried about the 2025 Appropriation Bill is the expectation that government will bring inflation down to 15 per cent within the period.
The truth about the 2025 Appropriation Bill is that despite its perceived silver linings, it is basically an inflationary budget. The exchange rate of the budget at N1,500 to the dollar is inflationary. It will fuel imported inflation.
Besides, the budget is built around a deficit of N13 trillion which is 3.8 per cent of GDP. The deficit is a crass defiance of the provision of the prudential guidelines which pegs budget deficit at 3.5 per cent of GDP.
That enormous deficit which will be funded with domestic borrowings at 23 per cent and external loans at 10 per cent will fuel inflation. The deficit will make it extremely difficult to bring down inflation rate.
The oil reference price of the 2025 Appropriation Bill is another factor under contention. With Donald Trump poised to return to power as president of the United States of America (USA) on January 20, 2025 everyone expects a huge battle against crude oil sales that could plunge oil price below the budget reference price.
There are strong indications that Trump may force a negotiated settlement of Russia’s misadventure in Ukraine. That might return Russian oil to the global market and exert downward pressure on crude oil prices.
The architects of the 2025 Appropriation Bill were too optimistic in their projections.
However, Blueprint receives the 2025 Appropriation Bill with cautious optimism. We enjoin the federal government to implement the budget religiously while it accelerates work on the Calabar – Lagos Coastal Road project and the Sokoto-Badagry super highway to deliver dividends of democracy to Nigerians.
