Nigeria’s estimated 2018 budget deficit is N1.95 trillion making it one of the country’s highest ever fiscal deficit. Sizable as it looks, the Nigeria’s budget deficit which is only 1.73 percent of Gross Domestic Product (GDP) is the lowest among the top ten economies in Africa according to BusinessDay findings.
Behind Nigeria were Sudan (2.4%), Ethiopia (2.5%), Morocco (3.5%) and South Africa (3.6%). The South African and Nigerian governments are seeking to increase government spending this year to bolster economic growth after they both recovered from economic recession last year.
Libya had the highest budget deficit among the top economies with a deficit to GDP of 23 percent as the oil production level is down 30 percent from its 2013 levels due to supply disruptions in the country. Other Northern African economies such as Algeria and Egypt also had very high budget deficit to GDP ratio of 9 percent and 8.4 percent respectively.
Most countries had a projected a lower budget deficit in 2018 than in 2017 as overall economic fortunes improved in Africa.
Last week, President Buhari signed into law Nigeria’s highest ever budget with government expenditure expected to reach N9.12 trillion. Despite the increment of N1.8 trillion in 2018 projected budget expenditure from its 2017 level of N7.3 trillion, the current budget surprisinglystill had a lower deficit than it did last year.
The budget deficit for 2017 was N2.36 trillion (about 2.18% of GDP) compared to 2018 budget deficit of N1.95 trillion (about 1.73% of GDP). The government was able to reduce the budget deficit despite the 24.6 percent increase in expenditure size for 2018 thanks to higher crude oil prices and a projected revenue growth of more than40 percent from its 2017 levels.
Due to the late signing of the budget, it may be unlikely that the economy will grow by the projected 3.5 percent this year. International Monetary Fund earlier in the year forecasted that the economy will grow at 2.1 percent. First quarter economic growth in Nigeria was only 1.95 percent.
Economists have warned that the sharp increase in budget spending may bring about higher inflation as spending is expected to increase in the country as the general elections draw closer.
