The World Bank says that Nigeria’s constant fiscal deficit has worsened the nation’s public debt stock, with 96.3 per cent of government revenue spent on servicing debt in 2022.
The Bretton Woods institution disclosed this in its recent report: ‘Macro Poverty Outlook for Nigeria: April 2023 brief’.
The report said, “The fiscal position deteriorated. In 2022, the cost of the petrol subsidy increased from 0.7 per cent to 2.3 per cent GDP. Low non-oil revenues and high-interest payments compounded fiscal pressures. The fiscal deficit was estimated at 5.0 percent of GDP in 2022, breaching the stipulated limit for federal fiscal deficit of 3 per cent. This has kept the public debt stock at over 38 percent of GDP and pushed the debt service to revenue ratio from 83.2 percent in 2021 to 96.3 percent in 2022”.
The bank also said that the cash scarcity created by the CBN’s naira redesign policy hampered the country’s economic growth and poverty reduction efforts, adding that about 13 million Nigerians would become poor between 2019 and 2025.
“Nigeria is in a more fragile position than before the late 2021 global oil price boom. Growth and poverty reduction have further been affected by cash scarcity in the context of the Naira redesign. The economy is projected to grow by an average of 2.9 percent per year between 2023 and 2025, only slightly above the population growth rate of 2.4 percent. Growth will be driven by services, trade, and manufacturing. Oil production is projected to remain subdued in part because of inefficiencies and insecurity”, it noted.
“With Nigeria’s population growth continuing to outpace poverty reduction and persistently high inflation, the number of Nigerians living below the national poverty line will rise by 13 million between 2019 and 2025 in the baseline projection”, it added.
The World Bank also said that the worsening economic environment in the country had pushed millions of Nigerians into poverty.
The Washington-based bank further noted that macroeconomic stability has weakened considerably due to multiple foreign exchange rates, high and increasing inflation, rising fiscal pressures, and declining forex reserves.
It further noted that Nigeria’s fiscal position has deteriorated since 2015 due to declining oil revenues and rising expenditures, resulting in persistently high fiscal deficits. The bank also said that Nigeria’s chronically high inflation has been on the rise since 2019, especially for food items, eroding the purchasing power of poor and vulnerable Nigerians and increasing poverty.
The lending institution said that inflation reached an annual average of 18.8 percent in 2022, a 21-year high, with food inflation in 2022 estimated to have pushed five million Nigerians into poverty.
It added that multiple foreign exchange windows, the Central Bank of Nigeria, (CBN)’s provision of development finance at subsidised rates, and monetisation of the fiscal deficit compromise the effectiveness of monetary policy in the country.
