The World Bank has stated that Nigeria needs to address what it identified as the many fiscal challenges at the different levels of government, notwithstanding the positive economic growth recorded by the country in the third quarter (Q3) of this year.
World Bank’s Economic Update for Nigeria released on Wednesday noted that Nigeria’s GDP expanded by 1.4 per cent in Q3 of 2017 (year-on-year), making it 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,” read the new Nigeria Bi-Annual Economic Update, which has a special focus on the analysis of fiscal performance of Nigerian states.
Meanwhile, 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.
According to the World Bank Lead Economist for Nigeria, Ulrich Bartsch, “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 World Bank observed that inasmuch as all states have recorded progress on the reform measures included in the 22-point Fiscal Sustainability Plan, implementation is incomplete.
It stressed the need to strengthen fiscal performance through sustaining the state fiscal reforms that have been accelerated in the past two years, asserting that this was of paramount importance.