World Bank Warns That Nigeria Is Facing Existential Threat

As a result of Nigeria’s dwindling revenue, the constant payment of trillions of naira on fuel subsidy by the government and the attendant economic challenges, the World Bank on Wednesday warned that the country is likely facing an existential threat.

The international financial institution warned that if the country failed to optimise its tax system and focus on other areas to boost its revenue, the already low revenue would continue to drop. It noted that regardless of the hike in the price of oil in the international market, Nigeria had not reaped the benefits because of the huge amount spent on fuel subsidy.

The Senior Public Sector Specialist, Domestic Resource Mobilisation, at the World Bank, Mr Rajul Awasthi, said these at a virtual pre-summit, with the theme ‘Critical Tax Reforms for Shared Prosperity’, organised by the Nigerian Economic Summit Group on Wednesday. He claimed Nigeria would eventually have to eliminate the subsidy regime.

After the Federal Government budgeted about N4tn for subsidy payment in 2022, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said recently that government might spend a whopping N6.72tn as fuel subsidy in 2023 or pay N3.36tn up to mid-2023 if the subsidy regime would was to end in May 2023.

Similarly, the minister had consistently said the nation was dealing with revenue problems, which had forced the government to keep borrowing. The debt stock had increased to N41.6tn in the first quarter of 2022 with projections that it could peak at N45tn by the end of the year. Nigeria is rated the fifth on the list of the World Bank’s debtors, with $11.7bn debt stock as of June 30, 2021.

Recall that The International Monetary Fund had in March projected that Nigeria might spend 93 percent of its revenue on debt servicing in 2022, but the minister revealed a few weeks ago that about 119 percent of the country’s revenue was spent on debt servicing. This means that government had to borrow to meet its debt financing obligations, a development many economists had described as disturbing and unsustainable.

In a slide Awasthi shared during his presentation, which showed Nigeria’s Development Update, he explained that between 2015 and 2019, Nigeria’s non-oil revenues were part of the lowest in the world and as a result the second lowest in spending, and that oil revenues were also falling even when oil prices were higher.

He said, “Nigeria has the largest economy in Africa and the largest country in Africa by population, so it is critical to Africa’s progress. There is no doubt about that. But the government of Nigeria, from the public finance perspective, is really facing an existential threat. Let’s not downplay the situation. That is the actual reality.