A delicate fiscal balance

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Our last week’s piece exposed the precarious position of Nigeria as everything appears to be out of balance – from the most miserable country in Africa to a high and growing unemployment rate to population explosion. Unemployment, brought about by sluggish economic growth and high cost of living are the chief purveyors of Nigeria’s miserableness. Economic growth is dwarfed by that of the population for years now. Coupled with the demographic nightmare – overrepresented by youths in a population with a median age of 18 – the challenge of delivering jobs and sustainable livelihoods has never been more cogent. Failure to do this will continue to exacerbate the insecurity levels that currently threatens to overrun the country from all flanks.

But the challenge of growing the economy and providing jobs has never been as difficult as it appears to be for the current government. The greatest hindrance to economic growth today is infrastructure. The country’s very poor record in ease of doing business over the years is largely attributable to infrastructure constraints. Firms have responded by voting with their feet. Economic activity is low and so is productivity.

Although infrastructure spend has been ramped up significantly since 2016, the bulk of the country’s annual budget is still spent on recurrent rather than capital expenditure. As a result, the rate of expansion of core infrastructure stock remains very low with the attendant drag on productivity. Nigeria’s core infrastructure stock stands at less than 20% of the country’s GDP against 70% World Bank’s benchmark for improved ease of doing business.

The recent infrastructure ramp-up in the budget is largely financed through borrowing which again weakens the fiscal position – almost 70% of independent government revenue now goes to servicing debts. Evidently, Nigeria’s economic system is not designed … Read More...