The N47.9 trillion 2025 budget proposal recently approved by the Federal Executive Council (FEC), has been described as a mere paper tiger which carries no weight.
Some economists who spoke on the budget estimates said the depreciation of the naira and inflation have rendered the local currency almost worthless.
They say, though the N47.9 trillion 2025 budget proposal may look almost double of that of 2024 which was N28.7 trillion, in terms of real value, they are almost the same.
The Minister of Budget and Economic Planning, Senator Abubakar Atiku Bagudu announced on Wednesday last week that the Federal Executive Council (FEC), has approved the sum of N47.9 trillion as the 2025 budget proposal.
He also announced that the medium term expenditure framework (MTEF) approved by FEC contains a borrowing of N9.22 trillion to finance the budget deficit in 2025.
Nigeria is currently indebted to the tune of N134.3 trillion ($91.3 billion) as at the end of the second quarter of 2024.
This was an increase of 10.35 per cent from the N121.7 trillion recorded in the first quarter, according to the Debt Management Office (DMO).
The Central Bank of Nigeria reports that Nigeria’s debt servicing expenses reached N6. 04 trillion in the first half of 2024, marking a sharp increase of 68.8 per cent from the N3. 58 trillion recorded during the same period in 2023.
The country over the years has resorted to borrowing to finance its annual budgets because of its low revenue generation.
As at June 2024, Nigeria’s debt-to-GDP ratio rose to 55 per cent marking a significant increase from 42.4 per cent in December 2023.
The government has consistently argued that the country does not have a debt problem because its debt to GDP ratio is still within acceptable limits, it however acknowledges that it has a revenue problem.
For instance, while the country budgeted N21.83 trillion for 2023 appropriation year, the total revenue generated by the Federal Inland Revenue Service (FIRS), the Nigeria Customs Service and non-oil exports was N17.96 trillion leaving a deficit of N3.87 trillion.
So far in this year, revenue from FIRS as of the first quarter was N3.94 trillion, Customs on its part as at November has generated N5.07 trillion, while revenue from non-oil exports as at the first six months of the year was N3.8 trillion ($2.7 billion) at an exchange rate of N1,400/$.
This shows that the country is still far from its total revenue projection of N19.60 trillion for 2024.
To change the narrative, the Tinubu administration recently sent four tax bills, known as the Nigeria Tax Reform Bills, to the national assembly with the aim of modernising revenue collection to meet the needs of the country and in line with his administration’s renewed hope agenda.
Part of the new tax bill is a proposal to raise the value added tax (VAT) from 7.5 per cent to 10 per cent by 2025, with further increases to 12.5 per cent from 2026 to 2029, and 15 per cent from 2030 onwards.
Professor Oyebanji Oyelaran-Oyeyinka, Special Adviser to the AfDB President on Industrialisation, said the problem of Nigeria is that it is not a productive economy.
Insisting that the N47.9 trillion proposed for 2025 budget is too small, as it is just about $30 billion, he said Nigeria should stop punching below its weight.
According to him, “As small as UAE is, it has a budget of $150 billion. The fact is that our annual budgets are too small that is why we have problem with funding education, health and other social infrasteucture.”
While commending the effort to harmonise the tax system, he said the bedrock of economic growth is to make the economy productive. “If you are not a productive economy, you cannot eliminate poverty,” he said.
Mr. Benjamin Ogbeide, a former FCT chapter chairman of the Chartered Institute of Taxation of Nigeria (CITN), said the government is looking at financing the 2025 budget with the expected increased proceeds from VAT.
“But that will come with its own challenges,” he said, adding that while the government may be looking at the huge sum that will come into its coffers, it should also know the the increase in VAT rate will push up inflation.
He said the most important thing is not about collecting tax, but using it to provide social amenities for the people.
On his part, Director General of Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), Sola Obadimu, said if one checks the dollar value of the 2025 budget proposal and that of 2024, the difference may not be much considering that naira has lost significant value.
Accoding to him, “The Customs is bragging that it has so far made N5. 07 trillion, what is the real value of that amount?”
He also warned that government should be careful the way it is going about trying to shore up its revenue because it could also be hurting the economy.
He said, the main duty of the Customs is to facilitate trade, not to generate revenue. “If in the course of trying to generate revenue, they impede trade, the economy suffers,” he said.
A Professor of Accounting and Financial Department, Lead City University, Ibadan, Professor Godwin Oyedokun, said given Nigeria’s historical revenue challenges, a proposed budget of N47.9 trillion is undoubtedly ambitious.
He noted that the country has struggled to meet its revenue targets in recent years, often relying heavily on debt financing to bridge the gap.
He however said the successful implementation of the new tax laws and regulations will be crucial.
“While the proposed budget is ambitious, it is essential to implement effective strategies to increase revenue generation. This includes strengthening tax administration, expanding the tax base, and improving tax compliance. By taking these steps, Nigeria can work towards a more sustainable fiscal future,” he said.