Ndubuisi Francis in Abuja
The World Bank has stated that notwithstanding Nigeria’s positive economic growth in the third quarter (Q3) of 2017, the country needs to address what it identified as the many fiscal challenges at the different levels of government.
The World Bank’s Nigeria Economic Update released Wednesday noted that Nigeria’s GDP expanded by 1.4 per cent in the third quarter of 2017 (year-on-year), the second quarter of growth after the recession of 2016, reflecting recovery in oil production, good performance in agriculture, and stronger non-oil industry growth due to the easing of foreign exchange constraints.
“Yet, many fiscal challenges remain at different levels of government, and effort is needed to successfully address those,” it said.
The new Nigeria Bi-Annual Economic Update has a special focus on the analysis of fiscal performance of Nigerian states. With the shortfall in revenue, fiscal pressure persists at subnational government levels, putting a strain on service delivery.
The special focus shows that the fiscal deficit of states increased significantly from an estimated 0.2 per cent of GDP in 2014, to one per cent in 2015 and 2016.
Also, the total state debt increased from 2.4 per cent in 2014 to 4.0 per cent of GDP by the end of 2016.
The states’ fiscal crisis led to two sets of financial assistance packages by the federal government.
The second—the Budget Support Facility (hinged on a 22-point Fiscal Sustainability Plan)—was advanced in mid-2016 and due to close in mid-2017.
The World Bank Lead Economist for Nigeria, Ulrich Bartsch, said: “In light of the continuing fiscal pressures, there is a strong need to strengthen the performance of the states through the full and sustained implementation of reforms to increase internally-generated revenues and state spending efficiency, and to strengthen state debt management and fiscal transparency.” The bank stated that while all states have made progress on the reform measures included in the 22-point Fiscal Sustainability Plan, implementation is incomplete.
It harped on the need to strengthen fiscal performance through sustaining the state fiscal reforms that have been accelerated in the past two years, adding that it was of paramount importance.
This aside, the most recent World Bank 2018 ‘Doing Business’ report highlighted improvements in Nigeria’s investment climate, and in its efforts to continue to diversify the government’s sources of revenue.