A Public Finance Management and Governance Expert has cautioned that Nigeria’s proposed 2025 budget increase could spur economic growth and improve public services but may also trigger inflation and exchange rate instability if not managed effectively.
President Bola Tinubu, in separate communications to the Senate and House of Representatives, raised the proposed 2025 budget from N49.7 trillion to N54.2 trillion, attributing the hike to additional revenues from key government agencies. Tinubu noted that the extra funds comprised N1.4 trillion from the Federal Inland Revenue Service (FIRS), N1.2 trillion from the Nigeria Customs Service (NCS), and N1.8 trillion from other government-owned agencies.
Benjamin Ekeyi, the Public Finance Management and Governance Expert, explained that the increased spending could positively affect Nigeria’s GDP, create jobs, and enhance public services in health, education, and infrastructure. “If the budget is well-implemented, it may signal government commitment to development, thereby attracting investors,” he observed.
However, Ekeyi also warned of potential downsides. He cautioned that without corresponding productivity gains, the higher spending might worsen inflation—which currently exceeds 29 percent—and exert additional pressure on the naira. He further highlighted concerns about implementation challenges and corruption risks, noting, “Without accountability, increased spending may not translate into tangible benefits due to poor budget execution and corruption.”
Ekeyi emphasized that key economic indicators such as the fiscal deficit, inflation, and interest rates could be adversely affected. A widening deficit might lead to credit rating downgrades and increased borrowing costs. “If inflation rises, to curb it, the Central Bank of Nigeria (CBN) may raise interest rates, making borrowing costlier for businesses and individuals,” he added.
To mitigate these risks, Ekeyi recommended that the government boost revenue generation, expand the tax base, improve tax collection, and reduce reliance on oil revenues. “The Federal Government must ensure that the projected revenue from FIRS, Customs, and other revenue-generating agencies are effectively harnessed,” he stressed.
He also advised enhancing spending efficiency through stronger accountability measures, prioritizing high-impact projects, and curbing corruption and mismanagement. Additionally, Ekeyi urged the government to manage debt responsibly by favoring concessional loans and developing a clear debt management strategy. Coordinated fiscal and monetary policies, he said, are essential for stabilizing inflation and exchange rates.
“The budget increase can drive growth and development but also carries risks, particularly regarding inflation and corruption. Effective revenue mobilisation, spending efficiency, and debt management are crucial for the budget to have a positive long-term impact,” Ekeyi concluded.
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