Nigeria’s budget performance has been a subject of growing concern, as the country continues to grapple with economic challenges that undermine its fiscal stability. While budget planning often appears promising on paper, the reality is that execution falls drastically short. From missing revenue projections to unsustainable debt accumulation, Nigeria’s economic trajectory is worrisome and demands urgent attention.
A Widening Gap Between Budget Projections and Reality
One of the most alarming aspects of Nigeria’s budgeting process is the frequent failure to meet revenue projections. For instance, last year’s budget allocated N1 trillion to debt servicing, yet actual expenditure ballooned to over N8 trillion—a staggering 700% variance. This highlights the government’s inability to accurately forecast or control spending, which places the nation in an increasingly precarious financial position.
Compounding this issue is the overall budget overrun. Despite falling short on revenue projections, the government spent well beyond the budgeted N27 trillion, including an additional 30% supplementary appropriation. This practice is unsustainable, as it leads to continuous borrowing, placing Nigeria in an ever-deepening debt hole.
The Perils of Foreign Currency-Denominated Debt
Nigeria’s debt structure is another major concern. Unlike some countries that can resort to printing money to manage domestic debt, Nigeria has borrowed heavily in foreign currency. This exposes the country to exchange rate volatility, making debt repayment even more challenging. Any depreciation of the naira directly increases the cost of servicing foreign debts, exacerbating fiscal pressures.
Transparency Deficit in the Budgeting Process
The lack of transparency in Nigeria’s budgeting process further compounds these issues. The National Assembly has yet to approve the budget, and if past experiences serve as any indication, legislators may add up to 10% in additional spending, without clear revenue sources to support such increases. Without greater oversight and public scrutiny, budgetary allocations risk being driven by political expediency rather than economic necessity.
Uncertain Tax Reforms and Inflationary Pressures
The government’s reliance on unapproved tax reforms to fund its budget creates another layer of uncertainty. While the 2024 budget assumes revenue growth from expanded tax measures, these reforms have yet to be approved or implemented. This means expenditure is guaranteed, but revenue is not—a risky fiscal approach that could deepen deficits.
Additionally, rather than curbing inflation, the government’s approach seems to be fueling it. The current budget is twice the size of last year’s—an unprecedented increase. With excessive government spending and rising debt levels, inflationary pressures continue to mount, eroding the purchasing power of ordinary Nigerians.
The Shrinking Economy: A Nation in Recession
Nigeria’s economic decline is undeniable. Since 2014, the country has been in a state of recession, experiencing negative growth in real terms. The nation’s GDP has shrunk from $500 billion in 2014 to a mere $193 billion today. Such a significant economic contraction signals deeper structural issues that go beyond budget mismanagement. Urgent intervention is required to stabilize the economy and restore growth.
The Way Forward: Urgent Reforms Needed
To reverse this troubling trend, Nigeria must embrace fiscal discipline and implement meaningful economic reforms. Former Minister of Finance, Zainab Ahmed, once emphasized the need for greater transparency and accountability in the budgeting process. These principles must guide future financial policies to prevent further economic deterioration.
Recommendations for Improvement:
Transparency and Accountability: The government must ensure openness in budget formulation and implementation to rebuild public trust.
Revenue Generation: Nigeria must diversify its revenue sources, including implementing effective tax reforms and enhancing non-oil revenue streams.
Expenditure Management: There must be stricter controls on government spending to prevent reckless fiscal expansion and avoid excessive debt accumulation.
Nigeria’s budgetary performance raises serious concerns about the country’s economic future. The government must take immediate steps to restore fiscal discipline, promote transparency, and ensure responsible financial management. Without these measures, the risk of economic instability and worsening inflation remains high, leaving ordinary Nigerians to bear the brunt of poor governance. The time for action is now.