Here we are again, another year, another budget, another set of promises tied to huge numbers. Nigeria’s 2025 budget proposal—worth N49.740 trillion with a massive N13.388 trillion deficit—has been announced with the usual excitement. But beyond the big numbers, the real question is: Is this a smart economic move, or are we just delaying problems by borrowing more money?
If you ask the government, they’ll say this is the fuel that will push Nigeria’s economy forward. But if you look deeper, it feels like we’re trying to power a fast car with empty promises. The stock market is paying close attention, trying to figure out if this budget will give stocks a boost or just leave investors stuck in more financial confusion.
The amount of borrowing in this budget is huge, to say the least. Almost 98% of the shortfall is planned to be covered by taking on new debt—mostly through bonds, Treasury bills, and loans from international organizations. If you’re invested in bank stocks, you might be excited because banks are likely to benefit from all this government borrowing. Banks have always found ways to make money during tough times, and with government investments looking safer and more appealing, listed banks are set to do well.
But here’s the issue: when the government takes all the available credit, private businesses struggle. Companies that depend on bank loans to stay afloat will be pushed aside. The cost of borrowing will go up, and businesses already dealing with losses from foreign exchange and higher production costs will see their profits shrink even more. If you thought 2024 was hard for industrial and consumer goods companies, just wait—higher financing costs will cut deeper into their profits, reducing earnings and pulling stock prices down.
When it comes to income, the government’s approach hasn’t changed much. Oil still makes up most of the expected earnings, with little effort to collect taxes from more people or create different sources of income. It’s the same risky strategy—relying on oil prices staying high enough to prevent problems. Companies like Seplat Energy and Oando might benefit if oil prices stay strong, but for everyone else, it’s a waiting game where global markets decide Nigeria’s financial future.
Then there’s the issue of taxes. The new change to the capital gains tax sounds good in theory—increasing rates to match corporate income tax and focusing on transactions over N50 million. While this might bring in a bit more money for the government, it could also reduce high-value stock trading. Investors don’t like higher taxes, and if this discourages big transactions, the market’s ability to trade smoothly will suffer. That’s not good news for an already struggling exchange.
On the positive side, spending on infrastructure could make a big difference. With almost N18 trillion set aside for building projects, industries like cement, construction, and industrial goods are likely to see some growth. Companies like Dangote Cement, Lafarge Africa, and other major players in infrastructure are expected to gain from this spending, which could push their stock prices up. If the government actually completes these projects, these sectors could see long-term benefits.
However, there’s a cause for concern: Nigeria’s budget still relies too much on foreign loans and struggles with inefficiencies in the public sector. State-owned companies don’t bring in much revenue, and inefficiencies keep holding back productivity. The global investment community is paying attention, and they’re not happy with what they see.
