Imagine trying to fix a leaky roof by borrowing more money for repairs, only to realise that most of your earnings are already going into paying off past debts. That’s where Nigeria finds itself today.
The government has raised the 2025 budget from ₦49.7 trillion to ₦54.2 trillion, citing additional revenue from taxes, customs duties, and other state-owned agencies. While officials insist this will drive economic growth, many fear it will add more pressure to an already fragile financial system.
“With this expanded budget, experts worry Nigeria is digging itself into an even deeper financial hole, borrowing to survive rather than to grow.”
More spending, more debt?
At first glance, increasing the budget seems like a positive step—more money for roads, hospitals, and infrastructure. But where is the extra funding coming from?
The government claims it has generated an additional ₦4.5 trillion, yet Nigeria still faces a staggering ₦16 trillion deficit. This means a large portion of the spending will be financed through more borrowing.
Nigeria’s debt has been spiralling out of control. In 2023, over 90 percent of government revenue was used just to service existing debt—leaving little room for actual development.
With this expanded budget, experts worry Nigeria is digging itself into an even deeper financial hole, borrowing to survive rather than to grow.
How the markets will react
Financial markets are expected to tread carefully following the budget increase. With interest rates already at 27.5 percent, further borrowing could push them even higher, making it harder for businesses and individuals to access loans.
Moreover, the situation does not indicate that interest rates will decline, as the Monetary Policy Committee (MPC) is likely to raise rates further, even if only marginally.
Investors will be watching closely—if borrowing continues unchecked, confidence in the economy could weaken, further devaluing the naira, which now trades at just 0.42 CFA per ₦1. This dramatic decline in currency value highlights how the naira has lost its glory to a smaller currency.
While investing in infrastructure is essential for long-term growth, experts warn that it must be done strategically. Nigeria already suffers from poor roads, unreliable electricity, and weak transport systems.
The World Bank in December 2024 reported that 80 percent of Nigeria’s roads are in bad shape, while PwC in July 2024 raised concerns that the country’s infrastructure funding remains insufficient.
Without careful planning, pouring more money into projects without addressing corruption and inefficiencies could scare off foreign investors and further destabilise the economy.
The inflation time bomb
Another major concern is inflation. Nigeria is already battling a 34.8 percent inflation rate as of December 2024—one of the highest in decades. Increased government spending could flood more money into the economy, driving up demand for goods and services.
While this might seem good for businesses in the short term, it could also push prices even higher, making life unbearable for everyday Nigerians who are already struggling with rising costs.
Paul Alaje, chief economist at SPM Professionals, warns that with the budget increase, the government’s inflation targets of 15 percent may no longer be realistic.
If spending outpaces revenue and productivity, inflation could remain stubbornly high, eroding the purchasing power of millions.
Read also: Nigeria’s budget dilemma: Bureaucracy thrives, infrastructure suffers
Infrastructure boost or economic misstep?
Supporters of the budget hike argue that increased spending is necessary for Nigeria’s development. Some believe the country’s weak infrastructure is holding back economic growth and that a bigger budget will help fund critical projects, create jobs, and boost productivity.
However, history suggests a different reality. Nigeria has a long record of budget allocations failing to translate into real improvements. Many projects suffer from delays, mismanagement, and outright corruption.
Without strict oversight and transparency, this extra spending could disappear into government bureaucracy rather than improving people’s lives.
Is there a smarter way forward?
Rather than simply increasing spending, Nigeria must rethink how it manages its finances. Improving tax collection and cracking down on evasion could boost revenue without excessive borrowing.
Cutting wasteful government spending—such as excessive travel budgets, duplicated agencies, and inflated contracts—could free up funds for essential projects. Encouraging private sector investment in infrastructure could reduce the need for heavy government borrowing while still driving growth.
The road ahead
Nigeria’s expanded budget is both an opportunity and a risk. If managed wisely, it could help boost growth and create a more resilient economy.
But if borrowing continues unchecked and spending lacks transparency, Nigeria could find itself on an even more dangerous financial path.
The big question remains: Is this budget the start of a stronger economy, or is Nigeria heading deeper into a debt crisis?
Oluwatobi Ojabello, senior economic analyst at BusinessDay, holds a BSc and an MSc in Economics as well as a PhD (in view) in Economics (Covenant, Ota).
English (US) ·