Nigeria’s Budget Deficit to Remain at 6.1% of GDP—IMF

By Aduragbemi Omiyale

The International Monetary Fund (IMF) has warned that Nigeria’s budget deficit could remain high at 6.1 per cent of its gross domestic product (GDP).

This concern was raised in a statement issued on Wednesday after discussions with the Nigerian authorities from June 6-10, 2022.

The IMF team led by Ms Jesmin Rahman was in Nigeria to discuss recent economic and financial developments and the economic outlook for the country.

In the statement made available to Business Post, it was disclosed that the high fiscal deficit to GDP would be triggered by the payment of petrol subsidies.

In the 2022 budget, President Muhammadu Buhari made a provision for fuel subsidy payment for about N500 billion from January to June with the intention of stopping the payment from July 1, 2022.

However, after labour unions kicked against this plan, the government approached the National Assembly for the provision of about N2.5 trillion for the same purpose from July to December 2022.

The global lender sees this development as a threat and it stated in its report that, “The fiscal deficit of the consolidated government is expected to remain high at 6.1 per cent of GDP due in great measure to costly petrol subsidies and limited tax revenue collections.”

However, it expressed satisfaction with the gradual economic growth, saying “Economic recovery continues to gain strength on the back of services and agriculture with GDP growth reaching 3.6 per cent (y/y) in Q1 2022.”

“Latest data shows economic growth broadening to all sectors except oil, where production remains weak reflecting continued security and technical challenges,” it added.

“Regarding the economic outlook, GDP growth is projected at 3.4 per cent (y/y) in 2022 while inflation is expected to remain elevated,” a part of the statement noted.

The IMF raised concern with the decline in the external reserves “despite supportive oil prices,” falling to $38.6 billion at the end of May 2022, having reached $41.5 billion in September 2021 boosted by SDR allocation and Eurobond issuance.