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Nigeria’s fiscal stability in decline, lagging behind continental average – Tesah Capital

2 years ago
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Nigeria’s fiscal stability in decline, lagging behind continental average – Tesah Capital

In a recent report released by Tesah Capital, Nigeria’s fiscal stability (4%) has been revealed to be on a declining trajectory, falling below the continental average (5.18%). This alarming trend has raised concerns among economists and policymakers about the country’s ability to achieve long-term economic sustainability and effectively navigate the challenges it currently faces. The report sheds light on the factors contributing to Nigeria’s deteriorating fiscal stability, pointing to the government’s failure to implement stability-oriented fiscal policies and establish mechanisms to reduce external vulnerability.

One of the key shortcomings highlighted in the report is the government’s inability to pursue medium-term objectives that promote debt sustainability and fiscal consolidation. These objectives are crucial for maintaining fiscal stability and instilling confidence among investors and international financial institutions. Without a clear roadmap and effective implementation of these policies, Nigeria’s fiscal position remains vulnerable to external shocks and economic uncertainties.

Moreover, the absence of a robust stabilization mechanism further compounds Nigeria’s fiscal challenges. Such a mechanism would play a crucial role in mitigating the impact of economic downturns and reducing the country’s vulnerability to external factors. By establishing a stabilization fund or similar instruments, Nigeria could enhance its resilience and ability to weather economic storms, thus ensuring more stable fiscal conditions.

Nigeria’s underperformance in terms of GDP growth compared to its peers in sub-Saharan Africa (SSA) is another cause for concern. Despite being Africa’s largest economy, with a GDP of $518 billion, Nigeria has struggled to keep pace with the growth rates achieved by its regional counterparts. This discrepancy in economic performance raises questions about the effectiveness of Nigeria’s policies and their ability to unlock the country’s full economic potential.

While Nigeria has been on a path of economic recovery following the disruptions caused by the COVID-19 pandemic, significant challenges persist. Inadequate infrastructure, weak governance, and limited diversification are among the structural hurdles that continue to hamper the country’s growth prospects. These challenges have far-reaching implications for Nigeria’s economic outlook, casting a shadow of uncertainty over its recovery and future trajectory.

Addressing Nigeria’s fiscal stability and broader economic challenges requires a multifaceted approach. Policymakers must prioritize the implementation of stability-oriented fiscal policies that promote debt sustainability, fiscal consolidation, and the establishment of effective stabilization mechanisms. This would not only enhance Nigeria’s fiscal resilience but also contribute to restoring investor confidence and attracting much-needed foreign direct investment.

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Furthermore, structural reforms aimed at addressing the country’s infrastructure deficit, improving governance, and diversifying the economy are imperative. Investing in critical sectors such as energy, transportation, and agriculture, while enhancing transparency and combating corruption, can create a conducive environment for sustainable growth and development.

The decline in Nigeria’s fiscal stability, as revealed by the Tesah Capital report, raises significant concerns about the country’s economic trajectory and its ability to achieve long-term sustainability. Urgent action is required to address the shortcomings in stability-oriented fiscal policies, establish effective stabilization mechanisms, and tackle structural challenges. By undertaking these reforms, Nigeria can strengthen its fiscal position, unlock its full economic potential, and pave the way for a prosperous future.

Tags: fiscal stabilitylagging behind continental average - Tesah CapitalNigeriaNigeria's fiscal stability in declineTesah Capital
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