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| Finance Minister, Kemi Adeosun and Central Bank of Nigeria governor, Godwin Emefiele |
The World Bank has identified three ways the 36 states and Abuja can survive economic challenges and ensure sustainable growth.
The bank said in its new Nigeria Bi-Annual Economic Update released on Wednesday in Abuja that the states and Abuja should ensure sustained reforms to increase internally-generated revenues, IGRs; improve their spending efficiency; and strengthen their debt management and fiscal transparency.
Since 2015, many states have been under serious fiscal pressures to deliver service, with dwindling revenues from the monthly federation account as a result of a drop in global crude oil prices.
The World Bank special publication showed that the states’ fiscal deficit increased significantly from an estimated 0.2 per cent of gross domestic product, GDP, in 2014, to one per cent in 2015 and 2016.
Besides, the report said, total states’ debt increased from about 2.4 per cent of GDP in 2014 to over 4.0 per cent by the end of 2016.
Despite a N2 billion bailout support from the federal government in 2016 to help the states meet their financial obligations, particularly in settling several months arrears of workers’ salaries and pension claims, most of the states are still owing their workers a backlog of unpaid entitlements.
Equally, two tranches of the Paris Club refund by the federal government also proved inadequate to save the states from their distressful fiscal challenges.
Desperate for survival, the states have asked the federal government to release the balance of the refund to them to strengthen their financial positions.
The Debt Management Office, DMO, in its latest debt statistics for October 2017 puts the current debt profile of the states and Abuja at over N1.2 trillion (about $3.94billion).
“At present, states remain under considerable fiscal stress, with states requesting continuation of the Budget Support Facility beyond the original end date of May 2017.
“This level of fiscal deficits would lead to an increase in total state debt stock to 5.4 per cent of GDP and 200 per cent of revenue by 2020”, the World Bank report said.
“In light of the continuing fiscal pressures, there is a strong need to strengthen the performance of the states through the full and sustained implementation of reforms to increase internally-generated revenue and state spending efficiency, and strengthen state debt management and fiscal transparency”, the World Bank Lead Economist for Nigeria, Ulrich Bartsch, said in the report.
The National Bureau of Statistics, NBS, revealed in its latest report that the country’s GDP – the aggregate value of goods and services in the economy over a period – grew by 1.4 per cent in the third quarter of 2017 (year-on-year), the second quarter of growth after the recession of 2016.
The World Bank said the growth reflected the impact of “recovery in oil production, good performance in agriculture, and stronger non-oil industry growth due to the easing of foreign exchange constraints.”
While all the states have in recent times made progress on reform measures included in the 22-point Fiscal Sustainability Plan, the Bank noted that implementation was incomplete, necessitating strengthening of fiscal performance by sustaining the ongoing fiscal reforms in the last two years.
The latest World Bank 2018 ‘Doing Business’ report highlighted improvements in Nigeria’s investment climate, following improvement in the country’s ranking by 24 places. The report also noted the country’s efforts to continue diversifying the government’s sources of revenue.
After contracting for five consecutive quarters since early 2016, Nigeria’s economy recorded a 0.6 per cent positive growth (year-on-year) in the second quarter of 2017, with growth projections expected to reach one per cent during the year amidst sustained recovery of oil production.
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