Nigeria, Africa’s largest oil-producing nation, is grappling with a staggering revenue shortfall of N15.7 trillion over the course of eight years.
This development according to a report by BusinessDay, draws serious concerns about the country’s fiscal stability.
Data from the recently published 2024-2026 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) reveal the alarming trend.
The federal government had set a revenue target of N52 trillion over this eight-year period but has consistently fallen short of its goals. As of June 2023, the deficit stands at a colossal N15.7 trillion.
Analysts are increasingly worried as government initiatives to boost revenue have largely failed, except for limited success in growing “independent revenue” from federal government-owned agencies.
Seun Smith, a public finance analyst, remarked, “Even if the new tax reform committee is relatively successful, I expect it will take a few years to show results.” This suggests that the revenue woes may persist for some time.
In the first half of 2023, the federal government had projected N6.44 trillion in revenue to support its budget, but it fell short, realizing only N5.19 trillion, which is 80 percent of the expected revenue.
Amidst growing concerns about poverty, insecurity, and soaring inflation, the allocation of billions of Naira to luxury items in the 2023 supplementary budget has faced strong criticism.
Economists argue that such expenditures are insensitive to the struggles of young Nigerians trying to make a living.
The trend of revenue shortfalls stretches back to 2016, with each passing year falling short of revenue projections. In 2022, the deficit was N1.16 trillion, and in 2021, it was N2 trillion.
The revenue projections for 2020 fell short by N1.8 trillion, and 2019 witnessed a significant deficit of N2.87 trillion. The financial shortfalls highlight a long-standing issue of fiscal mismanagement.
Critics also question the government’s allocation of resources to luxury items and renovations of presidential residences, given that more than half of Nigeria’s population lives in poverty. Kingsley Moghalu, founder and president of IGET and a former deputy governor of the Central Bank of Nigeria, commented, “The cost of governance is too high.”
The MTEF and FSP also shed light on the decline in capital importation over three consecutive years, from an annual level of $16.812 billion in 2018 to just $5.32 billion in 2022. Quarterly capital importation figures also reveal a stark 51.51 percent drop from the fourth quarter of 2021 to the fourth quarter of 2022.
The report shows that trade deficits, loans, and currency deposits accounted for the largest component of capital importation in 2022, followed by foreign portfolio investment and foreign direct investment.
Lekan Ademola, a Lagos-based asset manager, expressed concerns over Nigeria’s financial situation, stating, “Nigeria has ignored its revenue challenge by going on a recurrent expenditure spree.” This disregard for fiscal responsibility has led to a persistent low-growth economy.
Additionally, Nigeria’s public procurement practices have been under scrutiny, with Agora Policy, an Abuja-based think tank, reporting that the country is losing at least $10 billion annually due to a lack of transparency and accountability in public contracts procurement.
The report identifies various issues, including inflated contract costs, absence of procurement plans, poor project prioritization, and manipulation of procurement processes.
As Nigeria grapples with these revenue shortfalls and fiscal challenges, a more comprehensive and effective approach to revenue generation and expenditure management is becoming increasingly urgent.
The consequences of failing to address these issues could be severe, impacting the well-being of the Nigerian population and the country’s overall economic stability.
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