TINUBU's 2025 budget proposal recipe for economic stagnation – ATIKU

Monday, December 23, 2024 - Former Vice-President Atiku Abubakar has criticized Nigeria’s proposed 2025 budget, calling it inadequate for addressing the nation’s economic challenges and fostering sustainable growth. In a statement on Sunday, Abubakar described the budget as a continuation of “business-as-usual” fiscal practices that increase Nigeria’s external debt burden.

“The 2025 federal budget, amounting to N48 trillion with a revenue forecast of N35 trillion, resulting in a deficit exceeding N13 trillion or 4% of GDP, reflects a continuation of business-as-usual fiscal practices,” he said. “This represents a persistent trend under the APC-led administration since 2016, wherein budget deficits have been consistently presented, accompanied by an increasing reliance on external borrowing. To bridge this fiscal gap, the administration plans to secure over N13 trillion in new borrowings, including N9 trillion in direct borrowings and N4 trillion in project-specific loans.”

Abubakar argued that this borrowing strategy mirrors past administrations, further increasing public debt and compounding risks associated with interest payments and foreign exchange exposure.

Highlighting lapses in the proposed budget, Abubakar pointed to “weak budgetary foundations” and underperformance in the execution of the 2024 budget. “The 2024 budget’s underperformance signals poor budgetary execution. By Q3 of the fiscal year, less than 35% of the allocated capital expenditure for MDAs had been disbursed, despite claims of 85% budget execution,” he said, emphasizing that underperformance in capital spending raises concerns about the implementation of the 2025 budget.

The former vice-president also criticized the budget for its disproportionate debt servicing, noting that N15.8 trillion (33% of the total expenditure) is allocated to debt servicing, nearly equal to the planned capital expenditure of N16 trillion (34%). “Moreover, debt servicing surpasses spending on key priority sectors such as defence (N4.91 trillion), infrastructure (N4.06 trillion), education (N3.52 trillion), and health (N2.4 trillion),” he said. This imbalance, he argued, risks crowding out essential investments and perpetuating a cycle of borrowing that threatens fiscal stability.

He also highlighted concerns about unsustainable government expenditure, stating, “The government’s recurrent expenditure remains disproportionately high, with over N14 trillion (30% of the budget) allocated to operating an oversized bureaucracy and supporting inefficient public enterprises.” Abubakar said this inefficiency leaves limited resources for development and infrastructure investment.

Regarding capital investment, Abubakar said the allocation—ranging from 25% to 34% of the total budget—falls short of addressing Nigeria’s infrastructure deficit. “It amounts to an average capital allocation of about N80,000 ($45) per capita, insufficient to meet the demands of a country grappling with slow growth and infrastructural underdevelopment,” he said.

Abubakar further criticized the government’s decision to increase the VAT rate from 7.5% to 10%, describing it as a “regressive measure” that will worsen the cost-of-living crisis. “By imposing additional tax burdens on an already struggling populace while failing to address governance inefficiencies, the government risks stifling domestic consumption and exacerbating economic hardship,” he said.

He concluded by stating that the 2025 budget lacks the structural reforms and fiscal discipline required to address Nigeria’s economic challenges. “To enhance the budget’s credibility, the administration must prioritize the reduction of inefficiencies in government operations, tackle contract inflation, and focus on long-term fiscal sustainability rather than perpetuating unsustainable borrowing and recurrent spending patterns,” Abubakar said. He emphasized that a shift toward a disciplined and growth-oriented fiscal policy is essential for Nigeria’s economic recovery.