The Nigerian Economic Society (NES) has issued a warning, stating that the country’s economic progress and the social welfare of its people may be seriously threatened by Nigeria’s declining tax generation.
This might be seen in a report that NES President Adeola Adenikinju gave at the organization’s 65th annual conference in Abuja.
According to Adenikinju, Nigeria might rank among the nations with the lowest revenue collection given the amount of money the nation generates, which raises questions about the sustainability of the country’s economy.
The president of NES cautions, “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.”
According to the most recent data available on the World Bank website, Nigeria’s government revenue as a proportion of its gross domestic product (GDP) in 2021 was 7.3%, ranking it among the five lowest in the world.
The economics professor at the University of Ibadan stated that Nigeria’s dependence on erratic oil earnings and pervasive inefficiencies in revenue collection worsen the country’s financial problems.
He continued by saying that even if the nation’s revenues are declining, more borrowing would be required to cover the deficits, which will raise the total amount of debt held by the government.
Nigeria’s overall debt stock increased by N24.33 trillion in the first three months of 2024 to N121.67 trillion from N97.34 trillion as of December 2023, according to data from the Debt Management Office.
While conceding that Nigeria will continue to borrow as allowed by the 2024 Appropriations Act, the Abuja-based organization stated that it “expects improvements in the government’s revenue to enhance debt sustainability.”
According to the National Economic Summit (NES) chief, 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. “
The decline in global oil prices, poor oil output and exports, and a non-diversified economy are all contributing to a slowdown in revenues, which means the government will have to borrow money to cover its budget deficits.
Adenikinju continued, “Rising public debt burden raises concerns on Nigeria’s fiscal sustainability.”
According to a recent report by the Central Bank of Nigeria (CBN), a decrease in government revenue caused the federal government’s fiscal deficit to rise by 0.1 percent month over month to N824.79 billion in April from N823.91 billion in March.
The President of NES also mentioned that Nigeria’s heavy debt servicing is a result of its spending exceeding its income.
“High levels of spending on subsidies and debt servicing, limiting investments in critical infrastructure,” he emphasized, describing Nigeria’s expenditure patterns.
“Rising rigid expenditure, especially debt servicing and personnel costs, undermines the potential for capital investment, constraining fiscal space and hindering long-term economic growth,” according to the report.
