Nigeria Projects Lower Fiscal Deficit as Revenue Rises, Borrowing Costs Ease

By Adedapo Adesanya

Nigeria expects its federal fiscal deficit to come in below target this year as higher revenue and lower borrowing costs ease pressure on the country’s budget.

The Minister of Finance, Mr Taiwo Oyedele, said Nigeria had in December targeted a fiscal deficit of 4.2 per cent of gross domestic product (GDP) this year, but the government plans to revise that forecast lower.

“We think it will be narrower than the 4.2 per cent,” he said in London on Wednesday, as per Bloomberg.

“The priority is the cost of debt relative to revenue, and that already is moving in the right direction,” he said.

The outlook for the federal government differs from the broader fiscal picture, with the World Bank expecting Nigeria’s consolidated budget deficit — which also includes state and local governments — to widen this year as stronger capital spending by states and rising federal personnel, interest, and pre-election spending outweigh higher revenue.

Mr Oyedele this month disputed concerns about Nigeria’s debt burden after World Bank data showed first-half interest payments exceeded federal government revenue by 24 per cent.

The Finance Ministry said the comparison overstates the burden because the interest figure includes obligations serviced on behalf of other tiers of administration, while the revenue figure excludes some government receipts.

“We have some of our revenues that haven’t been captured,” Mr Oyedele said separately at a Chatham House event, adding that higher revenue and moderating interest costs will lower the fiscal-deficit ratio.

The country’s total public debt, comprising domestic and external borrowing, rose 21% to $121 billion as of June from a year earlier, according to the latest data on the debt agency’s website.

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) reduced its benchmark rate by 350 basis points to 23 per cent in September, with yields on short-dated debt falling to the lowest this year subsequently before rising this month.

Mr Oyedele also said the government plans to announce a new fiscal-deficit target after a review.

“We don’t think it will be worse than the target; we think it will be better,” he said.