Nigeria’s fiscal deficit has raised concerns despite the removal of fuel subsidies, a move aimed at reducing the country’s financial burden. President Bola Tinubu’s administration projected a deficit of N9.18 trillion for 2024, representing 3.88% of the country’s GDP. This figure, although lower than the N13.78 trillion deficit recorded in 2023, has sparked debate among analysts.
Key Factors Contributing to the Deficit
High Cost of Governance*: Analysts attribute the widening deficit to the high cost of governance and inefficient spending within the government.
Recurrent Expenditure*: Non-debt recurrent expenditure stands at N9.92 trillion, with debt service projected at N8.25 trillion and capital expenditure at N8.7 trillion.
Revenue Challenges*: Nigeria’s revenue targets are often not met, with a persistent gap between actual and projected revenues.
Economic Reforms and Future Projections
President Tinubu’s administration has implemented economic reforms aimed at improving the nation’s fiscal health. Some notable achievements include.
Reduced Fiscal Deficit*: The fiscal deficit narrowed from 5.4% of GDP in 2023 to 3.0% 2024.
External reserves rose from $4 billion in 2023 to over $23 billion by the end of 2024.
The administration aims to eliminate multiple taxation, promote small business growth, and protect low-income households through tax reforms.
Implications and Concerns
The increased deficit may lead to reduced spending on critical areas like capital projects and human capital, which are vital for economic growth and job creation. Experts are concerned about the sustainability of Nigeria’s economic growth, given the country’s reliance on oil revenue and challenges in meeting revenue targets.