Nigeria’s 2025 appropriation bill was designed against a backdrop of global and domestic economic challenges, including high inflation, exchange rate volatility, and fiscal constraints.
The proposed budget is a 41.91% increase from the ₦35.05 trillion allocated in 2024 (₦28.7 trillion initial budget plus ₦6.2 trillion supplementary budget).
Prioritising defence and security (9.87%), followed by infrastructure (8.16%), education (7.08%), and health (4.99%), the 2025 budget reiterates the government’s economic vision, particularly in tackling insecurity, which has negatively impacted business operations, investor confidence, and agricultural productivity, leading to rising food prices and high poverty rate.
The government has projected ₦36.35 trillion in revenue (up from ₦25.9 trillion in 2024) while budgeting an aggregate expenditure of ₦49.74 trillion, resulting in a deficit of ₦13.39 trillion. Revenue is expected to come from both oil and non-oil sources.
An important component of the budget is tax reform, which includes nearly doubling VAT from 7.5% to 12.5% by 2026, although essential goods like food and medicine will remain exempt.
The government also aims to boost revenue through tax administration improvements and agency restructuring, with the Federal Inland Revenue Service (FIRS) and Nigerian Customs Service (NCS) playing key roles.
However, these revenue targets could have huge implications for businesses and consumers.
Impact on Businesses
The budget’s increased focus on defence and security (9.87%) points to a commitment in addressing insecurity, which could improve the business climate, reduce operational risks, and boost investor confidence.
Again, higher capital expenditure on infrastructure may lower logistics and production costs in the long term.
However, several challenges remain:
- Higher Taxes on Businesses: A VAT increase (to 12.5% as proposed) will raise costs for businesses dealing in non-exempt goods and services. Companies will either absorb these costs or pass them on to consumers, potentially reducing demand.
- Increased Compliance Costs: Businesses will need to adjust tax reporting systems to comply with new tax rules, leading to additional operational expenses.
- Rising Borrowing Costs: The CBN’s monetary tightening policies have resulted in higher interest rates, making it more expensive for businesses to finance expansion. This could slow investment and economic growth.
- Telecom Sector Impact: The 50% increase in telecommunications tariffs will also raise operational costs for businesses dependent on digital services, affecting sectors such as fintech, e-commerce, and tech startups.
Impact on Consumers
- Increased Cost of Living:
- While VAT exemptions cover essential goods, prices for non-exempt items (about 18% of goods and services) will rise, reducing disposable income and increasing poverty risks.
- High Inflation Concerns:
- The budget targets an inflation drop from 34.6% to 15%, but given existing economic pressures, achieving this may be difficult in the short term. Until inflation is contained, consumers will continue facing rising costs for essential goods and services.
- Rising Telecom Costs:
- A 50% increase in telecom tariffs will impact mobile users, businesses, and digital services, making internet access more expensive and reducing affordability for low-income consumers.
2025 Budget: Broader Economic Consequences
The 2025-2027 Medium-Term Expenditure Framework (MTEF) projects that 56.3% of revenue will come from oil, while 43.7% will be generated from non-oil sources, primarily taxation.
Key economic assumptions include:
- GDP growth rate increase
- Inflation decrease to 15%
- Exchange rate at ₦1,500/$1
- Oil price at $75 per barrel
- Crude oil production at 2.06 million barrels per day
However, oil revenue targets are vulnerable to pipeline vandalism, oil theft, and refinery inefficiencies. Addressing these issues is essential for meeting the revenue projections.
Similarly, foreign exchange pressures, high energy costs, and increased interest rates remain major challenges for businesses and consumers.
Improving energy infrastructure and forex stability will be essential to reducing the cost of living and enhancing Nigeria’s economic resilience.
While the 2025 budget seeks to stabilise Nigeria’s economy through higher revenue generation and increased security spending, its impact on businesses and consumers will largely depend on effective policy implementation, tax efficiency, and inflation control.
Without these, high costs, regulatory burdens, and economic uncertainty may overshadow the intended benefits.
