The Nigerian Economic Society (NES) has warned that Nigeria’s slowing revenue generation may pose significant challenges to its economic growth and social wellbeing of its citizens.
This is contained in a report presented by Adeola Adenikinju, president of NES at the 65th annual conference of the economic group in Abuja.
Adenikinju noted that with the level of revenues generated in the country, Nigeria may find itself among countries with lowest revenue collection, raising concerns over its economic sustainability.
“Nigeria’s fiscal performance benefited from the foreign exchange liberalization in 2023, but the country still suffers a revenue problem and could remain among the bottom 10 countries with the lowest revenue in the medium-term,” NES president warns.
This is even as the Nigeria’s government revenue as a percentage of its gross domestic product (GDP) is among the five lowest in the world at 7.3 percent in 2021, according to the latest data on World Bank’s website.
The University of Ibadan professor of Economics said Nigeria’s revenue challenges are exacerbated by widespread inefficiencies in revenue collection, and reliance on volatile oil revenues.
He added that while the country’s revenues are dwindling, it will result in more borrowings to fill the deficits, further increasing the government’s debt stock.
Data from the Debt Management Office showed that Nigeria’s total debt stock rose by N24.33 trillion in the first three months of 2024 to N121.67 trillion from N97.34 trillion as of December 2023.
The Abuja-based institution, acknowledging that Nigeria’s borrowing will continue as stipulated in the 2024 Appropriation Act, “expects improvements in the government’s revenue to enhance debt sustainability.”
Meanwhile, the NES chief said Nigeria’s “public debt stock surged to 42.3% of GDP in 2023, driven by escalating borrowing to cover the widening fiscal deficit, posing significant risks to fiscal sustainability and future economic stability”.
As revenues are slowing due to factors such as fall in global oil prices, low oil output and exports and non-diversification of the economy, the government will have to make up for its budget deficits through borrowings.
“Rising public debt burden raises concerns on Nigeria’s fiscal sustainability,” Adenikinju said.
A recent report by the Central Bank of Nigeria (CBN) revealed that the federal government’s fiscal deficit increased month-on-month by 0.1 percent to N824.79 billion in April from N823.91 billion in March on decline of government’s revenue.
The NES president also noted that Nigeria’s expenditure is outpacing its revenues, leading to high debt servicing.
He stressed that “Nigeria’s expenditure is marked by high levels of spending on subsidies and debt servicing, limiting investments in critical infrastructure”.
“Rising rigid expenditure, especially debt servicing and personnel costs, undermines the potential for capital investment, constraining fiscal space and hindering long-term economic growth,” the report stated.
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