Fiscal consolidation is a process in which a government adopts strategies to promote fiscal sustainability, through reduction in its deficits and debt accumulation. It has almost become a recurring requirement of the IMF for member countries in need of policy support and instrument programmes. In Nigeria, the growing fiscal deficit now projected at N1.95trn is 1.80% of GDP. The good news is that Nigeria’s debt stock is gradually declining although still high at N22.37trn in June.
The problem of managing costs, optimising resources and growing non-oil revenue has been daunting for almost all previous and current government administrations. The debt service as a percentage of independent revenue is as high as 63%. This has partly translated to a wide gap between the proposed and actual expenditure, resulting in stunted economic growth. On average, Nigeria’s actual spending was approximately 10% lower than the proposed budget between 2012-2015. This gap spiked to approximately 27.4% in 2016 before declining slightly to 25.7% in 2017.
Oil prices have dipped by 4% recently to $70.62pb. Combined with a 7.3% drop in production to 1.66mbpd in Q2’18, it could put the revenue for 2018 under pressure. This could make further fiscal consolidation a major challenge.
The Federal Government of Nigeria (FGN) has approved a sum of N72.9bn for the reconstruction of the Apapa port road. The successful completion of this project will go a long way in easing the Apapa gridlock which has become a major embarrassment to Nigeria.
In this edition of the FDC Monthly publication, the FDC Think-Tank analyzes these issues and their implications on businesses and investment decisions.
Enjoy your read.