 |
| Critical Review Budget Proposal for Fiscal Year 2025 |
The proposed budget for Fiscal Year 2025 is N49.7 trillion, with a focus on restoring macroeconomic stability, enhancing the business environment, and fostering inclusive growth, employment, and poverty reduction. However, a critical analysis of the budget reveals several concerns and shortcomings.
Revenue Projections:
- Total Revenue: N34.820 trillion
- Oil Revenue: N11.670 trillion
- Non-Oil Revenue: N23.150 trillion
- Tax Revenue: N12.320 trillion
- Non-Tax Revenue: N4.210 trillion
- Grants: N2.310 trillion
Critique: The revenue projections are overly optimistic, relying heavily on oil revenue, which is subject to volatility. The non-oil revenue projections are also unrealistic, given the country's struggling non-oil sector.
Expenditure Projections:
- Total Expenditure: N47.960 trillion
- Recurrent Expenditure: N24.850 trillion
- Capital Expenditure: N23.110 trillion
- Personnel Costs: N6.330 trillion
- Overhead Costs: N3.420 trillion
- Capital Expenditure: N23.110 trillion
Critique: The expenditure projections are unsustainable, with a significant portion allocated to recurrent expenditure. The capital expenditure allocation is also inadequate, given the country's massive infrastructure deficit.
Deficit:
- Total Deficit: N13.140 trillion
- Deficit as a percentage of GDP: 3.5%
Critique: The budget deficit is alarming, and the government's reliance on borrowing to finance the deficit is unsustainable. This will lead to increased debt servicing costs and a higher debt-to-GDP ratio.
Sectoral Allocation:
- Defence and Security: N4.910 trillion
- Infrastructure: N4.060 trillion
- Education: N3.500 trillion
- Health: N2.480 trillion
- Agriculture: N1.230 trillion
- Transportation: N1.050 trillion
- Housing and Urban Development: N830 billion
Critique: The sectoral allocation is skewed, with too much emphasis on defence and security, and not enough on critical sectors like education and health. The allocation to infrastructure is also inadequate, given the country's massive infrastructure deficit.
Key Objectives:
1. Restore macroeconomic stability
2. Enhance the business environment
3. Foster inclusive growth, employment, and poverty reduction
4. Address security challenges
5. Reduce inflation
6. Promote economic diversification
7. Improve infrastructure
8. Enhance human capital development
Deficiencies in Meeting Set Objectives:
1. Inadequate allocation to education and health: The allocation to education and health is insufficient to address the significant challenges in these sectors.
2. Insufficient investment in infrastructure: The allocation to infrastructure is inadequate to address the country's massive infrastructure deficit.
3. Lack of clear plan for economic diversification: The budget does not provide a clear plan for promoting economic diversification and reducing dependence on oil exports.
4. Inadequate measures to address insecurity: The budget does not provide adequate measures to address the security challenges facing the country.
5. Insufficient allocation to social welfare programs: The allocation to social welfare programs is insufficient to address the significant poverty and inequality challenges facing the country.
SWOT Analysis:
KEY CONCERNS AND GAPS
1. Inadequate Revenue Projections: The proposed budget relies heavily on oil exports, which is subject to volatility.
2. Inadequate Allocation to Critical Sectors: The budget allocation to education, healthcare, and infrastructure is insufficient to address the significant challenges in these sectors.
3. Uncertainty of Insecurity: The proposed budget assumes a significant reduction in insecurity and terrorism in the Niger Delta region, which is uncertain.
4. Dropping Inflation 50% too Ambitious: The proposed budget assumes a significant reduction in inflation, which may be too ambitious.
Critical issues at stake
1. Diversify Revenue Streams:
- Implement policies to promote non-oil exports
- Increase tax revenue through efficient tax administration
- Encourage private sector investment in infrastructure development
2. Rebalance Expenditure Priorities:
- Allocate more resources to critical sectors, such as education, healthcare, and infrastructure
- Implement cost-saving measures in government spending
- Promote public-private partnerships in infrastructure development
3. Address Insecurity and Terrorism:
- Implement policies to address the root causes of insecurity and terrorism
- Increase investment in security infrastructure and personnel
- Promote community-based initiatives to prevent radicalization
4. Manage Inflation:
- Implement monetary and fiscal policies to reduce inflation
- Promote price stability through efficient market regulation
- Encourage private sector investment in agriculture and manufacturing
Strengths:
1. Diversified economy with a growing non-oil sector
2. Large and young population with a growing middle class
3. Strategic location with access to major markets
4. Rich natural resources, including oil and gas
Weaknesses:
1. Dependence on oil exports
2. Inadequate infrastructure, including roads, bridges, and ports
3. High levels of corruption and insecurity
4. Limited access to finance for small and medium-sized enterprises (SMEs)
Opportunities:
1. Growing demand for Nigerian products in international markets
2. Increasing investment in infrastructure development
3. Growing trend towards economic diversification
4. Potential for increased trade with neighboring countries
Threats:
1. Volatility in global oil prices
2. Insecurity and terrorism in the Niger Delta region
3. Dependence on imported goods and services
4. Climate change and its impact on agriculture and infrastructure
*Ripples that can mitigate against budget provision
✓Impact of US on Daily Production Capacity:_
The US is a major market for Nigerian crude oil, and any changes in US demand or policy can impact Nigeria's daily production capacity. The proposed budget assumes a daily production capacity of 2.06 million barrels per day, but this may be impacted by changes in US policy, such as the imposition of tariffs or quotas on Nigerian crude oil.
✓Uncertainty of Insecurity:
The proposed budget assumes a significant reduction in insecurity and terrorism in the Niger Delta region. However, the uncertainty of insecurity remains a major threat to the budget, and any increase in insecurity could impact the budget's assumptions and projections.
✓Dropping Inflation 50% too Ambitious:
The proposed budget assumes a significant reduction in inflation, from 34.6% to 15%. However, this target may be too ambitious, given the country's history of high inflation and the potential for external shocks, such as changes in global oil prices.
Strategic line of action -
1. Prioritize addressing security challenges
2. Implement policies to reduce inflation
3. Diversify the economy
4. Rebalance expenditure priorities
5. Ensure transparency and accountability
6. Invest in human capital development
7. Promote private sector participation in infrastructure development
8. Enhance tax administration and revenue collection
My opinion
✓The revenue projections are overly optimistic, the expenditure projections are unsustainable, and the sectoral allocation is skewed.
✓The budget also fails to address several key objectives, including promoting economic diversification, addressing insecurity, and reducing poverty and inequality.
The government needs to revise the budget to address these concerns and provide a clear and actionable plan for achieving its key objectives.
Conclusion:
The proposed budget for Fiscal Year 2025 has several shortcomings and concerns
. The revenue projections are overly optimistic, the expenditure projections are unsustainable, and the sectoral allocation is skewed.
The budget also fails to address several key objectives, including promoting economic diversification, addressing insecurity, and reducing poverty and inequality.
The government needs to revise the budget to address these concerns and provide a clear and actionable plan for achieving its key objectives.