Onome Amuge
Nigeria’s latest fiscal scorecard has cast a disappointing light on the precarious state of the public finances, reflecting the mounting risks to growth and debt sustainability in Africa’s fourth-largest economy. Figures released by the federal government for the first nine months of 2024 reveal widening deficits, weak oil receipts, and rising debt service costs that now consume the bulk of revenues.
The report, covering January to September, showed that Nigeria is struggling to generate sufficient income to fund its ambitions, while structural weaknesses in both revenue and expenditure undermine fiscal resilience, a reality long flagged by economists.
Budget optimism versus fiscal reality
President Bola Ahmed Tinubu’s administration had initially set out with an ambitious plan. The 2024 appropriation bill, presented to the National Assembly in November 2023 at N27.50 trillion, was expanded after legislative revisions to N28.78 trillion, a record figure reflecting both political aspirations and an attempt to meet pressing development needs.
But optimism quickly gave way to fiscal gravity. By September, actual revenues stood at just N14.55 trillion, equivalent to 51 per cent of the annual projection and far short of the prorated target of N19.41 trillion.
“This is the classic mismatch between ambition and capacity. Nigeria keeps budgeting as if revenues will suddenly accelerate, but the structural bottlenecks are clear. Oil output is volatile, non-oil tax capacity remains shallow, and windfall projections often prove illusory,” said Ifeanyi Okonkwo, a Lagos-based economist.
Crude oil, long the bedrock of Nigeria’s federal purse, once again disappointed. Budget assumptions pegged 2024 oil revenues at N8.18 trillion, implying N6.13 trillion by the third quarter. Actual inflows came in at N4.64 trillion, 24 per cent below target.
Quarterly data show a stop-start pattern at N1.39 trillion in Q1, N1.33 trillion in Q2, before a rebound to N1.92 trillion in Q3. Analysts cite persistent production disruptions, theft, and underinvestment as drags on performance.
“The oil sector is no longer reliable as a fiscal anchor. Output volatility, global price swings, and security challenges mean over-reliance is risky. Yet the budget framework still treats oil as the foundation,” said Adeniyi Adepoju, senior economic analyst at the Nigerian Institute for Policy and Strategic Studies. “
If oil disappointed, non-oil receipts provided rare good news. Collections reached N3.66 trillion by September, 37 per cent above the prorated target of N2.68 trillion. Company income tax was the standout performer at N1.93 trillion, far exceeding the N1.10 trillion projection.
Value-added tax also performed strongly, hitting N605 billion against a target of N384 billion. Customs duties brought in N986 billion, marginally above expectations.
Independent revenues from government-owned enterprises (GOEs) proved even more important, totalling N2.79 trillion, well ahead of the N2.02 trillion benchmark. The second quarter saw an increase to N1.31 trillion, before moderating to N1.10 trillion in Q3.
“These numbers show that non-oil revenue has potential. With better compliance, digitised collections, and a broader tax base, Nigeria can reduce its vulnerability to oil shocks. But the improvements are still not large enough to offset the deep structural gap,” said Adepoju.
Windfall hopes dashed
A notable failure lay in so-called windfall revenues;budgeted at N6.28 trillion from foreign exchange gains and extraordinary taxes. By September, these sources had delivered nothing.
“The zero realization from windfall taxes and FX gains is alarming. It exposes the danger of treating uncertain windfalls as guaranteed. Budgets should be grounded in predictability, not hope,” said Okonkwo.
On the expenditure side, the government disbursed N21.87 trillion in nine months, below the prorated N24.34 trillion but far above revenues, reinforcing Nigeria’s chronic deficit.
Recurrent spending dominated at N14.65 trillion, virtually in line with the N14.66 trillion target. Personnel costs absorbed N3.54 trillion, while overheads for ministries, departments and agencies (MDAs) reached N921 billion. Pensions added another N336 billion.
But the most striking figure was debt service which stood at N8.93 trillion by September, 44 per cent higher than the projected N6.20 trillion. Domestic obligations consumed N4.39 trillion, while foreign debt repayments totalled N4.55 trillion.
In practice, more than 61 per cent of total revenues went straight to creditors.
“This is fiscal capture by debt service. It leaves little room for infrastructure, education or healthcare. Essentially, the government is transferring national resources to service past borrowing, rather than investing in future growth,” Adepoju lamented.
Capital expenditure shortfall
Capital spending, considered a critical component for long-term development, was once again squeezed. Against a target of N10.93 trillion by September, actual spending was N5.86 trillion, just 54 per cent performance.
MDAs spent N4.25 trillion of their N8.41 trillion allocation, while GOEs managed N107 billion of a N616 billion budget. Multilateral and bilateral loan-tied projects disbursed nothing, reflecting delays.
Grants and donor funds contributed N1.50 trillion, providing some relief. Statutory transfers were on target at N1.31 trillion.
Borrowing fills the gap
With revenues falling short and spending demands high, borrowing has once again become the fiscal shock absorber. By September, the deficit stood at N7.05 trillion, above the prorated N6.88 trillion.
The government leaned heavily on domestic markets, raising N7.05 trillion, already 16 per cent above the N6.06 trillion annual budget. Borrowing was front-loaded, with N1.47 trillion in Q1, N3.06 trillion in Q2, and N2.52 trillion in Q3. External borrowing added only N1.01 trillion of a planned N1.77 trillion.
Analysts warn that high domestic yields are crowding out private sector borrowing, raising concerns for growth. “The government’s heavy presence in the bond market pushes up rates, leaving little affordable credit for businesses,” said Cowry Research in a note.
For many observers, Nigeria’s fiscal dynamics reflect weak oil revenues, underperforming capital investment, rising recurrent costs, and borrowing to fill the gap.
“Debt service dominance means resources are being recycled to creditors rather than invested in the economy. Limited capital expenditure reduces productivity gains and competitiveness, creating a drag on growth. This in turn constrains revenues, deepening the deficit,” said Cowry Research.
The analysts argue that without reforms to boost oil output, broaden the tax base, and restrain recurrent spending, the cycle will intensify.
Despite the worrisome reality, analysts observed that some incremental positives exist. The resilience of company income tax and VAT collections indicate improved compliance and stronger collection mechanisms. Moreso, inflation, while eroding household welfare, has also inflated nominal tax receipts. Remittances from government enterprises have proven more robust than expected, providing an additional buffer.
“Non-oil revenues are not a panacea, but they are a critical part of the solution. Policy measures to expand the tax base, enforce compliance, and digitize collections can provide more stability and predictability,” Adepoju asserted.
Economists are unanimous in the assertion that the September 2024 fiscal report serves as a wake-up call. They noted that while the government’s efforts to strengthen non-oil revenues are commendable, structural weaknesses in oil production, recurrent spending patterns, and capital project execution remain deeply entrenched. Thus, they argued that without urgent reforms, the fiscal deficit will continue to expand, debt service will dominate, and long-term growth prospects will remain constrained.
