According to the World Bank, the Nigerian government spends only $220 per Nigerian per year, which is one of the lowest spending levels in the world at 12% of GDP.
The World Bank revealed this in a report for its Nigeria Finance Review for the period released on Monday. They stated that Nigeria needs to increase spending to stimulate economic development.
The World Bank stated that Nigeria’s spending must be increased from its current very low levels to promote economic development.
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.
Social sector investment
According to the bank, Nigeria not only spends little, but social sectors receive even less – less than a quarter of the national budget allocation.
They also stated that, when compared to similar countries, Nigeria’s spending on social sectors – education, health, and social protection – is very low, citing that in 2021, when the country was battling the COVID-19 pandemic, the average Nigerian received about $15 in public health services per year, compared to $55 in Indonesia.
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.
They stated that the key to raising public spending lies in urgently raising more revenue.
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 that low tax rates, inefficient tax administration, high tax expenditures, low tax morale, and opaque and complex oil sector governance continue to undermine Nigeria’s ability to raise more revenues.
The International Monetary Fund (IMF) has reduced Nigeria’s projected GDP growth for 2022 from 3.4% to 3% due to the country’s low oil production and the severe impact of flooding.
The IMF also predicted a massive economic slowdown for the country, with GDP growth slowing 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.
Reason for the slowdown
According to the multilateral lender, Nigeria’s oil production has declined since the middle of 2020 due to low investment and significant leakages brought on by poor maintenance and theft.
