The World Bank has revealed that Nigeria spent a staggering 96.3 percent of its 2022 revenue on servicing its debts. This dire statistic was contained in the Macro Poverty Outlook for Nigeria: April 2023 brief, which was released by the international financial institution. The report highlighted that Nigeria’s fiscal position deteriorated in 2022, with the cost of the petrol subsidy increasing from 0.7 percent to 2.3 percent of the country’s gross domestic product (GDP).
The report further revealed that Nigeria’s public debt stock remained at over 38 percent of GDP, and the debt service to revenue ratio soared from 83.2 percent in 2021 to a staggering 96.3 percent in 2022. This means that almost all of Nigeria’s revenue in 2022 was utilized to service its debt, leaving very little for other critical expenditures.
The fiscal deficit was estimated at 5.0 percent of GDP in 2022, surpassing the stipulated limit of 3 percent for a federal fiscal deficit. This indicates that Nigeria’s fiscal situation was far from ideal, with the country spending more than it earned and relying heavily on borrowing to fund its expenditures.
The report attributed Nigeria’s economic challenges to several factors, including declining oil production, costly fuel subsidies, exchange rate distortions, and monetization of the fiscal deficit. In the past, oil price booms had supported Nigeria’s economy, but this trend has changed since 2021. The report noted that macroeconomic stability had weakened, leading to a decoupling of oil revenues, fiscal deficit outturn, foreign exchange reserves, and economic growth from the cycle of higher global oil prices.
In 2022, Nigeria’s GDP growth decelerated from 3.6 percent in 2021 to 3.3 percent, driven by manufacturing, construction, and most services. However, the oil sector contracted by a significant 19.2 percent. The report revealed that growth was primarily driven by private consumption and investment from the demand side, while the deteriorating economic environment was pushing millions of Nigerians into poverty. The risks were tilted to the downside due to the lack of macro-fiscal reforms, the naira demonetization, and an uncertain external outlook, according to the World Bank.
The report’s findings paint a grim picture of Nigeria’s fiscal and economic health, with the country spending an overwhelming portion of its revenue on debt servicing and facing significant challenges in sustaining economic growth and reducing poverty. The World Bank’s assessment underscores the need for urgent and comprehensive reforms to address Nigeria’s fiscal imbalances and restore macroeconomic stability to foster sustainable economic growth and poverty reduction in the country.
