The World Bank says most of Nigeria’s resources are used to fund inefficient and retrogressive subsidies that mostly benefit the country’s wealthier households.

It added that Nigeria needs to fix its public finances to promote inclusive and sustainable development.

This was included in the World Bank’s review of Nigeria’s public finances released in Abuja on Monday.

According to the report, macroeconomic and fiscal reforms are urgently needed to boost Nigeria’s development outcomes, which are severely constrained by inefficient use of resources.

“Over the years, most of Nigeria’s resources have been used to fund inefficient and retrogressive petrol, electricity and foreign exchange subsidies.

“Not all of these subsidies are budgeted, which makes them difficult to track and review.

“However, available data suggest that these subsidies (as a share of spending on education, health and social protection in 2021) mainly benefit wealthy households.”

These subsidies also distort incentives, discourage investment, and crowd out spending on poverty alleviation projects, thereby hindering social development progress in Nigeria, the statement said.

It said Nigeria had one of the lowest levels of public spending and income in the world, undermining the government’s ability to improve service delivery.

“Total public spending in Nigeria averages 12 percent of GDP between 2015 and 2021, less than half the world average of 30 percent.”

More resources are needed to improve service delivery in Nigeria, the statement said.

“Therefore, one of the most critical aspects of meeting Nigeria’s enormous development needs lies in raising revenues, as the country consistently ranks among the worst performers in the world in terms of public revenue mobilization.

“Total income will average just 7% of GDP in 2015-2021, well below the global average of 24%.”

It said low tax rates and underutilization of the tax base, weak tax administration and substantial deductions for oil revenues limited Nigeria’s inability to generate sufficient revenue.

The statement quoted World Bank Group President David Malpass as saying: “The Nigerian government urgently needs to strengthen fiscal management and establish a unified and stable market-based exchange rate.

“The government also needs to phase out its costly regressive fuel subsidies and rationalize preferential trade restrictions and tax exemptions.

“These will lay the groundwork for the increases in public revenue and spending needed to improve development outcomes.”

Malpass said decisive steps would significantly improve Nigeria’s business climate, attract foreign direct investment and reduce inflation.

He said the World Bank was ready to increase its support to Nigeria as it designs and implements these key reforms.

The statement also quoted Nigerian country director Shubham Chaudhuri as saying: “Nigeria is at a critical juncture in its history and choices need to be made.

“A child born in Nigeria today would grow up to be only 36 percent productive if she had access to effective public education and health care and a life expectancy of only 55 years.”

Chaudhuri said these grim indicators point to the urgent need for Nigerian policymakers to take action to improve the macroeconomic and fiscal framework to sustainably increase spending and the quality of public services at the federal and state levels.

The statement said the review of Nigeria’s public finances was conducted at the request of the Federal Ministry of Finance, Budget and National Planning.

It said the report was prepared in close cooperation with the Federal Budget Office, the Office for National Statistics, the Office of the Commonwealth Accountant-General and the Office of Debt Management

It aims to inform the public debate on Nigeria’s future by providing a comprehensive analysis of the fiscal performance and necessary reforms needed to establish a robust and sustainable development model.

The aim is to provide broad-based economic opportunity to all Nigerians.


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