A new World Bank report on Nigeria has raised concerns on fiscal pressures of state governments arising from revenue shortfalls.
This had led to the states embarking on large scale borrowings and debt service challenges.
According to the Report released yesterday by Ulrich Bartsch, the World Bank Lead Economist for Nigeria, the development was just as the Nigeria’s GDP expanded by 1.4 per cent in the third quarter of 2017 (year-on-year), 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, adding that many fiscal challenges remain at different levels of government, and effort is needed to successfully address those.
The new Nigeria Bi-Annual Economic Update has a special focus on the analysis of fiscal performance of Nigerian states. With the shortfall in revenue, fiscal pressure persists at subnational government levels, putting a strain on service delivery.
The report shows that the fiscal deficit of states increased significantly from an estimated 0.2 per cent of GDP in 2014, to 1 per cent in 2015 and 2016.
Also, total state debt increased from 2.4 per cent in 2014 to 4.0 percent 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.
It noted that while all states have made progress on the reform measures included in the 22-point Fiscal Sustainability Plan, implementation is incomplete.
The need to strengthen fiscal performance through sustaining the state fiscal reforms that have been accelerated in the past 2 years is of paramount importance.