The International Monetary Fund (IMF) projects that Nigeria’s fiscal balance is estimated to increase considerably. More specifically, general government deficit is projected to widen from 4.8 to 5.9 percent of GDP between 2019 and 2020.1 Also, public debt is projected to increase substantially to 34 percent of GDP in 2020 from 29.1 percent in 2019. The increase in government general deficit can be attributed to sharp revenue declines occasioned by the pandemic. Although revenue could increase given the increase in the Value Added Tax (VAT) rate from 5 to 7.5 percent in 2020, and expenditure savings from the removal of power sector and fuel subsidies, the concurrent increase in expenditure related to COVID-19 emergency support will drive the widening fiscal deficit. However, as domestic activities recover to pre-COVID levels and spending on household and businesses vulnerable to the pandemic tapers down, the fiscal deficit is projected to narrow in 2021.
February 19, 2021
Nigeria Economic Update (Issue 6)
Related
Nigeria Economic Update (Issue 12)
The naira/dollar exchange rate remained largely stable at the parallel
market at ?320/$ during the period7, albeit slight
fluctuations on February 29, 2016 (?325/$) and March 2, 2016 (?328/$). The
decline in the hoarding of foreign currency as well as the substantial
reduction in the speculative demand for dollars were the two key factors
responsible for the ease of fluctuations in the forex market8. With the slight
increase in the price of crude oil, Nigerias foreign reserve slightly grew by $56 million, from 27.81 billion to $27.84 billion9.
With the continued increase in the price of crude oil, a modest build-up of
foreign reserve to guard against unfavourable commodity price movements is
expected in the near term.