The Case for Sustaining State Fiscal Reforms: Nigeria Economic Update
Nigeria's GDP expanded by 1.4 percent in the third quarter of 2017 (year-on-year), the second quarter of growth after the recession of 2016, reflecting recovery in oil production, good performance in agriculture, and stronger non-oil industry growth due to the easing of foreign exchange constraints. Yet, many fiscal challenges remain at different levels of government, and effort is needed to successfully address those, according to the World Bank’s Nigeria Economic Update, released on November 21.
The new Nigeria Bi-Annual Economic Update has a special focus on the analysis of fiscal performance of Nigerian states. With the shortfall in revenue, fiscal pressure persists at subnational government levels, putting a strain on service delivery.
The special focus shows that the fiscal deficit of states increased significantly from an estimated 0.2 percent of GDP in 2014, to 1 percent in 2015 and 2016. Also, total state debt increased from 2.4 percent in 2014 to 4.0 percent of GDP by the end of 2016. The states’ fiscal crisis led to two sets of financial assistance packages by the Federal Government. The second—the Budget Support Facility (hinged on a 22-point Fiscal Sustainability Plan)—was advanced in mid-2016 and due to close in mid-2017.
“In light of the continuing fiscal pressures, there is a strong need to strengthen the performance of the states through the full and sustained implementation of reforms to increase internally-generated revenues and state spending efficiency, and to strengthen state debt management and fiscal transparency,” said Ulrich Bartsch, World Bank Lead Economist for Nigeria.
While all states have made progress on the reform measures included in the 22-point Fiscal Sustainability Plan, implementation is incomplete. The need to strengthen fiscal performance through sustaining the state fiscal reforms that have been accelerated in the past 2 years is of paramount importance.
This aside, the most recent World Bank 2018 ‘Doing Business’ report highlighted improvements in Nigeria’s investment climate, and in its efforts to continue to diversify the government’s sources of revenue.
Source: World Bank
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