VANGUARD
A tough fiscal year 2025 appears to be underway following the tall order in currency valuation which may restrict the capacity of the Federal Government to fund the new budget.
This reduction in real value is due to the significant devaluation of the Naira in the last one year and financial experts believe if this situation is not reversed or improved, the N49.7 trillion proposed by President Bola Tinubu will not be able to provide goods and services that the N28.777 would have achieved at the end of the current 2024 budget implementation.
Already, the new forex policy of the Central Bank of Nigeria, CBN, designed to ensure the appreciation of the local currency succeeded in improving the value only for one week, only for the gains to reverse the following week up till last weekend.
In December 2023, the Naira exchange rate against the dollar was about N853/$1. The exchange rate movement has largely been against the local currency ever since, which President Tinubu told the National Assembly was in the region, N1,700/ $1. The Nigerian Foreign Exchange Market (NFEM) rate on the website of the Central Bank of Nigeria as of December 21, was N1,536.93/$1.
Inflation and the Naira Exchange Rate remain two key variables in the macro-economic management that have remained intractable over the years.
The government, in the 2024 budget, set a target of an exchange rate of N800/$1.
However, the monetary policy reform that saw the monetary authorities allow the Naira to exchange at market forces has seen it go through a significant depreciation, going as low as N1,800/$1 at a time before moderating to the current rate.
Similarly, inflation has maintained an upward trajectory. Inflation which has been the main driver of the CBN’s decision to maintain hikes in Monetary Policy Rate, the benchmark for the cost of loans from banks.
However, the monster remains untamed- although the Federal Government argues that the rate of increase has slowed.
The Federal Government inflation target in 2024 was put at 21%. However, the current inflation rate, according to the latest data from the National Bureau of Statistics (NBS) stands at 34.6%. Interestingly, in the 2025 budget, President Tinubu said his target is to reduce the inflation rate to 15%, next year.
2025 Budget Basic Assumptions and Parameters
- Oil Price Benchmark of 75 US Dollars per barrel;
- Daily oil production estimate of 2.06 million barrels per day (mbpd);
- Exchange rate of 1,500 Naira per US Dollar; and
- A total of 13.08 trillion naira or 4.6 percent of GDP; and 15.75 percent inflation rate 2025
Revenue and Expenditure
- Proposed Expenditure: N49.7 trillion
- Total Retained Revenue: N34.82 trillion
- Fiscal Deficit: N13.08 trillion.
Total expenditure is projected to be 49.7trillion naira and key notable highlights of the 2025 Budget Allocations which are aimed towards rebuilding the country are:
- Defense and Security: N4.91 trillion
- Infrastructure: N4.06 trillion
- Health: N2.48 trillion
- Education: N3.52 trillion
- 15.81 trillion naira for debt servicing
- Others N17.12 trillion
2024 Budget Highlights
The 2024 Budget of ‘Renewed Hope’ as proposed by President Tinubu outlines a total expenditure of N27.5 trillion (equivalent to $36.7 billion), with a projected revenue of N18.32 trillion ($24.4 billion) and a deficit of N9.18 trillion ($12.2 billion).
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