The Nigerian economy remains dependenton the small oil sector (under 10 percent of GDP) for thebulk of its fiscal revenues and foreign exchange earnings.This makes Nigeria’s balance of payments and governmentbudgets vulnerable to volatilities in oil prices. Indeed,growth and investment in Nigeria have been negativelyimpacted by repeated oil-price driven boom-bust cycles. Theoil price shock of late 2014 and its aftermath pushed theeconomy into recession and precipitated a major budgetarycrisis at the national and state levels which brought tolight the longer-term trend of weak domestic revenuemobilization. Nigeria’s weak revenue mobilization has majorimplications for growth and development, including forimproving its dire social service delivery outcomes. Thus,the country needs to take concrete steps to break its oildependency to improve its economic and social outcomes. Oilrevenues are recovering with increasing oil prices, butdistributions to the tiers of government are constrained bythe unbudgeted fuel subsidy and other deductions. The fuelsubsidy, no longer an explicit first line deduction from oilrevenues, mostly benefits the affluent and it is alsowidely-known that a portion of Nigeria’s imported petrol issmuggled out to neighboring countries where petrol is moreexpensive. The constrained net oil revenues, combined withnon-oil revenues that are constrained by limited tax policyreforms and are thus stagnated (relative to GDP), limitoverall revenue realization, thus constraining budgetexecution and the build-up of fiscal buffers. The growth inthe public debt stock between the first half of 2017 and thefirst half of 2018 was mainly attributable to the increasedEurobond issuances, some of which were used to liquidatecostlier domestic short-term debt. The Nigeria EconomicRecovery and Growth Plan (ERGP) 2017-2020 aims to achievemacroeconomic stability and economic diversification andthere is thus the need to accelerate its implementationprogress. The special focus topic for this report is onhuman capital development in Nigeria. Studies show thatbetween 10 and 30 percent of the differences in per capitaincome between countries can be attributed to human capital.The economic burden of malaria alone in Nigeria, accountingfor direct and indirect costs excluding mortality, isestimated at 13.5 percent of GDP. However, in the quest forsustainable growth, Nigeria, like many other countries, hasunderinvested in human capital. While physical capitalremains critical, it does not fully account for improvementsin growth.
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