IMF: Nigeria omits public spending worth 2% of GDP from official budgets

Nigeria failed to record public spending equivalent to about 2% of its Gross Domestic Product (GDP) in recent official budgets, creating a gap between the country’s reported fiscal deficit and its actual financing needs, according to the International Monetary Fund (IMF).

The disclosure was made on Wednesday by the IMF Resident Representative in Nigeria, Christian Ebeke, during an engagement with business executives in Lagos.

According to the IMF, the omission makes Nigeria’s fiscal deficit appear smaller than the government’s actual borrowing requirement because some public expenditures, particularly capital projects, were executed outside the official budget framework.

What the IMF is saying

Ebeke said the IMF’s assessment showed that a significant portion of government spending was not captured in official budget documents and implementation reports.

• “So far we think that there are about 2% of GDP of expenditure that were not reported that should be reported and should be recorded, so that this statistical discrepancy will disappear,” Ebeke said.
• He explained that the discrepancy is partly linked to large government projects executed off-budget, which distort assessments of Nigeria’s fiscal position and public investment levels.
• According to him, incomplete reporting also makes it more difficult to coordinate fiscal and monetary policies because policymakers may not have an accurate picture of the country’s true budget deficit.
• Ebeke added that Nigerian authorities have started addressing the issue by reviewing and revising recent budget laws to incorporate previously unrecorded expenditures, although updated budget implementation reports are still required.

He stressed that improving fiscal transparency remains critical, noting that off-budget spending also raises concerns about procurement processes and public accountability.

More insights 

The IMF noted that better fiscal reporting would improve the credibility of Nigeria’s public finances and provide a clearer picture of government spending and borrowing.

• Recording all public expenditures would eliminate the statistical discrepancy between reported fiscal deficits and actual financing requirements.
• He added that greater transparency would strengthen fiscal oversight and improve coordination between monetary and fiscal authorities.
• The Fund also noted that comprehensive budget reporting is essential for assessing the effectiveness of public investment and ensuring accountability in government spending.

The IMF’s findings suggest that Nigeria’s fiscal deficit may be understated when compared with the government’s actual financing needs because some expenditures are executed outside the official budget.

What you should know 

In its latest Article IV Consultation, the IMF commended Nigeria’s recent economic reforms, including foreign exchange liberalisation and fuel subsidy removal, stating that they have helped strengthen macroeconomic stability and improve investor confidence.

• However, the Fund also cautioned that the benefits of the reforms have yet to translate into broad-based improvements in living standards and warned that Nigeria remains vulnerable to external shocks, including geopolitical tensions and fluctuations in global commodity markets.

Also, the Fund cautioned Nigeria over its plan to raise up to $5 billion through a derivatives-based financing arrangement with First Abu Dhabi Bank, warning that such transactions are often complex and lack transparency.