Debt-distressed Nigeria sets ‘ambitious’ revenue target
Nigeria is setting its sights on a significant increase in revenues, aiming for a 60% uplift this year as a strategic move to stabilize its debt levels and alleviate economic hardship. This announcement was made by the country’s Finance Minister, Wale Edun, during a keynote speech at the World Economy Summit hosted by Semafor in Washington.
The ambitious revenue target is not just a lofty goal but a necessity for the West African nation. The aim is to trim its fiscal deficit from the current 6.1% of GDP down to 3.8%. This financial recalibration comes at a time when Nigeria’s public debt has soared to $108.2 billion at the end of 2023. This figure marks a 123% spike since 2012, a growth roughly six times the pace of the country’s GDP growth rate over the same period. Notably, debt financing consumed over 90% of the government’s budget last year, according to the Nigerian Debt Management Office.
Despite the reliance on debt as a source of development financing, Finance Minister Edun emphasized the significance of generating revenues to manage this debt sustainably. Comparing Nigeria’s fiscal strategies to that of the United States, he highlighted the critical role of revenue – through taxes and other government incomes – in servicing debt.
In a bid to boost revenue, the Nigerian government is focusing on enhancing its oil production capacity to reach at least 2 million barrels per day (bpd). This initiative comes after the country fell short of its 2023 oil production target, achieving only 1.47 million bpd against a target of 1.69 million, as reported by the Nigerian Upstream Petroleum Regulatory Commission. The shortfall was attributed to challenges such as theft and pipeline sabotage, which have also hampered Nigeria’s ability to benefit from recent surges in oil prices.
Moreover, the government is looking toward leveraging digital technology to improve the efficiency of tax collection and the imposition of various government fees and charges. These measures are part of a broader effort to shore up earnings and navigate through the economic crisis that has led to widespread protests across the nation.
Nigeria has been facing an escalating economic crisis, further intensified by labor unions’ demands for the cessation of borrowing from international financial institutions like the International Monetary Fund and the World Bank. These loans, they argue, are exacerbating the country’s economic distress.
The crisis deepened following President Bola Tinubu’s decision to end a fuel subsidy upon taking office on May 29, as part of a wider budget deficit-cutting reform package. This move, coupled with the depreciation of the local currency, the naira, has led to an upsurge in the prices of goods, putting additional economic pressure on the already distressed population.
In response to the financial predicament, the current administration has enacted a series of cost-cutting reforms. Among the notable measures is a temporary ban on publicly funded international travel for government officials. Furthermore, in an effort to tackle budgetary constraints, local media has reported that the government intends to sell three jets from its Presidential Air Fleet (PAF).
As Nigeria endeavors to navigate its way through these economic challenges, the focus on increasing revenue and managing debt sustainably emerges as a pivotal strategy. With the global eyes watching, the effectiveness of these measures in fostering economic stability and growth in Africa’s most populous country remains to be seen.
