By Omodele Adigun
Nigeria’s rising budget deficit continues to threaten its long-term outlook, warns Mr Lukman Otunuga, a UK-based analyst with FXTM.
According to him, the country’s ballooning debt stock has shown how excessive government spending can place an economy in an unfavorable position, despite its mission to stimulate growth.
Otunuga stated this in release, entitled: Spotlight Shines on Nigeria’s Growing Fiscal Deficit, made available to the media at the weekend.
The statement reads in part: “Over the past 10 years, Africa’s largest economy has been spent beyond its revenues with the IMF forecasting the government deficit to widen to 6.4 per cent of GDP this year from 6per cent at the end of 2021.
Nigeria’s total public debt is expected to reach 44.2per cent of GDP by 2027! One of the primary dangers of a budget deficit is the continued increase in prices. If the deficit forces the Central Bank of Nigeria (CBN) to release more money into the economy, such could feed into inflationary pressures – threatening economic growth. It does not end here, the ballooning debt lowers Nigeria’s national savings, encourages spending cuts, decreases the ability to respond to domestic/external shocks, and most importantly increases the risk of a fiscal crisis.
Indeed, the Federal Government recorded an N2.23 trillion fiscal deficit in the final quarter of 2021 thanks to shortfalls in oil revenues. Last year, the deficit expanded to a whopping N7.3 trillion after the actual expenditure of N11.69 trillion eclipsed the revenues of N4.39 trillion.