• Nigeria needs to increase spending to boost economic development
The World Bank has said that the Nigerian government spends only $220 per Nigerian per year, and at merely 12% of GDP, this is one of the lowest levels of spending in the world.
The World Bank disclosed this in a report on Monday for its Nigeria Finance Review for the period. They said Nigeria needs to increase spending to boost economic development.
The World Bank noted that to promote economic development, Nigeria needs to increase spending from its current very low levels.
The bank said, ”Despite its vast development needs, Nigeria spends only $220 per Nigerian per year, and at merely 12% of GDP, this is one of the lowest levels of spending in the world.
“Unfortunately, low public spending translates into poor development outcomes. The country is among the eight economies with the lowest human capital in the world, ranked 167th out of 174 countries on the World Bank’s Human Capital Index.
“As a result, a child born in Nigeria today will only be 36% as productive when he grows up as he could be if he had access to effective education and health services.
“In addition, infrastructure needs also remain extremely high. To provide all the infrastructure the economy needs to maximize its potential, the country would need to invest $ 3 trillion by 2050.”
The bank added that Nigeria not only is spending low, but social sectors receive very little – less than a quarter of the national budget allocation.
Compared with similar countries, Nigeria’s spending on social sectors – education, health, and social protection – is very low, citing that in 2021, and at a time when the country was battling the COVID-19 pandemic, the average Nigerian received about $15 worth of public health services a year, compared to $55 per person in Indonesia.
According to World Bank, “Low social spending limits the quantity and undermines the quality of health and education services that Nigerians can expect to receive. In turn, this reduces their chances of becoming productive workers and constrains private investment outside of the oil sector.
“At 7% of GDP in 2021, Nigeria’s revenue to GDP ratio is among the five lowest in the world. To boost revenues, the government has initiated important revenue-enhancing reforms over the last two years.
“ A few of these measures include increasing the VAT rates (from 5 to 7.5% in 2020), starting the process of limiting tax expenditures in certain sectors (2021), operationalizing the Electronic Money Transfer Levy, and introducing excise taxes on certain “sin” goods (2022)” they added.
They revealed key challenges that continue to undermine Nigeria’s ability to raise more revenues are low tax rates, tax administration inefficiencies, high tax expenditures, low tax morale, and opaque and complex governance of the oil sector.
Nigeria’s projected GDP growth for 2022 has been lowered by the International Monetary Fund (IMF) from 3.4% to 3% due to Nigeria’s weak oil production and the heavy impact of flooding.”
In the statement, the IMF also projected a massive economic slowdown for the country, causing GDP growth to slow to 3%.
Part of the statement said:.
“Output growth at 3.4% (y/y) in 2022 Q2 marked the seventh consecutive quarter of growth driven by various services sectors, especially information technology, trade, and finance.”
According to the multilateral lender, Nigeria’s oil production has been declining since the middle of 2020 due to low investment and significant leakages brought on by poor maintenance and theft.
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