The World Bank says Nigeria must fix its public finances, in order to promote inclusive and sustainable development.
This is contained in the World Bank Nigeria Public Finance Review Report released on Monday in Abuja.
A copy of the report was obtained from the World Bank’s website.
According to the report, macroeconomic and fiscal reforms are urgently needed to lift Nigeria’s development outcomes, which are severely constrained by inefficient use of resources.
”For years, a large share of Nigeria’s resources have financed inefficient and regressive subsidies for petrol, electricity, and foreign exchange.
“Not all these subsidies are accounted for in the budget, which makes them difficult to track and scrutinise.
“However, available data suggest that these subsidies, which accounted for more than the amount spent on education, health, and social protection in 2021, benefit primarily wealthy households.”
The statement said that these subsidies also distort incentives, discourage investment, and crowd-out spending on pro-poor programmes, thereby, hindering progress in Nigeria’s social development.
It said Nigeria had one of the lowest public expenditure and revenue levels in the world, undermining the government’s ability to improve service delivery.
“Between 2015 and 2021, total public spending in Nigeria averaged 12 percent of Gross Domestic Product (GDP), less than half the world average of 30 percent.”
The statement said improving service delivery in Nigeria required more resources.
“Therefore, one of the most critical aspects of meeting Nigeria’s vast development needs lies in raising more revenues, as the country ranks consistently among the world’s poorest-performing countries in terms of public revenue mobilisation.
“With total revenues averaging just seven percent of GDP in 2015-2021, far below the global average of 24 percent. ”
It said low tax rates and poor utilisation of tax bases, weaknesses in tax administration, and large deductions from oil revenues were constraining Nigeria’s inability to generate enough revenues.
The statement quoted the World Bank Group President, David Malpass as saying “Nigeria’s government urgently needs to strengthen fiscal management and create a unified, stable market-based exchange rate”.
“The government also needs to phase out its costly, regressive fuel subsidy and rationalise preferential trade restrictions and tax exemptions.
“These would lay the groundwork for the increases in public revenues and spending needed to improve development outcomes.”
Malpass said decisive moves would significantly improve the business-enabling environment in Nigeria, attract foreign direct investment, and reduce inflation.
He said the World Bank was ready to increase support to Nigeria as it designs and implements these critical reforms.
The statement also quoted Nigeria’s Country Director, Shubham Chaudhuri as saying “Nigeria is at a critical historical juncture and has a choice to make.
“A child born in Nigeria today will be only 36 percent as productive when she grows up as she could be if she had access to effective public education and health services, and has a life expectancy of only 55 years.”
Chaudhuri said these stark indicators illustrate the urgency for action by Nigeria’s policymakers to improve the macroeconomic and fiscal framework, to sustainably enhance the quality of spending and public services at federal and state levels.
The statement said the Nigeria Public Finance Review was conducted at the request of the Federal Ministry of Finance, Budget, and National Planning.
It said the report was prepared in close collaboration with the Budget Office of the Federation, the National Bureau of Statistics, (NBS), the Office of the Accountant-General of the Federation, and the Debt Management Office (DMO).
It aims to inform the public debate on Nigeria’s future by providing a thorough analysis of the fiscal performance and necessary reforms needed to establish a robust and sustainable development model.
The aim is to provide broad-based economic opportunities for all Nigerians.