Reality of Post-MDRI: Fiscal Sustainability and Development Trajectory of the Nigerian Economy

Abstract

Nigeria is trapped in fiscal unsustainability crises over a few decades, due to excessive debt accumulation and inability to strategically utilise borrowed funds on the projects that could allow selfliquidation. Available data support the arguments that deficit financing in most cases is utilised on recurrent expenditures. Consequently, accumulation of debt increases debt service obligations, which further aggravate the amount expended on recurrent expenditure. Viciously, more borrowing is usually required to meet debt servicing obligations. Meanwhile, the fiscal problem aggravates the excessive dependence on revenues from crude oil with little attention to non-oil revenue mobilisation; in this case, the crude oil price volatility creates incessant shocks on the expenditure plans vis-à-vis revenues shortage whenever the oil price crashes. This paper however, reviews the development trajectory of the country within the framework of relevant data up to 2021. It is however, observed that in the past six years, there are evidences that the country is reversing the poor trends on some macroeconomic parameters. For instance, the federal government attention is currently being shifted from oil revenues dependency to non-oil revenues mobilisation, such that in 2021, the percentage of non-oil revenues to total revenues is more than those from oil revenues. The same is observed on the non-oil export promotion which is sharing higher proportions compared to what had been obtainable in the past few decades. This paper therefore showcases that consistency in revenue diversification to non-oil sources and also the invigoration of non-oil export promotion will provide strong foundation for Nigeria fiscal liberation in the near future.