Nigeria’s challenging fiscal outlook

Nigeria's fiscal economy is facing a challenging outlook as the government seeks approval of the 2018 budget. Despite a surge in retained revenue to N 3.2 trillion over the first nine months of 2017, concerns linger over the ambitious revenue projections and potential risks in the debt market. Kayode Omosebi, Head of Research at ARM, highlighted key points during a CNBC Africa interview regarding the government's fiscal plans. One of the primary concerns raised by Omosebi is the disparity between the government's revenue projections and the actual non-oil revenue generated. While the government anticipates significant revenue from taxes and the sale of oil assets, the current revenue trends suggest a more cautious approach is required. Non-oil revenue remains a challenge, with the government banking on recovered stolen funds for a substantial boost. However, the timeline for realizing these funds is uncertain, raising questions about the achievability of the revenue targets. Furthermore, the intricate balance of oil prices plays a crucial role in shaping the fiscal landscape. Omosebi noted that while recent oil price rallies have been promising, the government must adopt a prudent approach by considering the average crude oil price for the year. With a projected average of $60 per barrel in 2018, the revenue inflow from oil is expected to stabilize. However, challenges persist in maintaining production levels amidst dwindling investments in the sector, limiting the potential for significant production increases. Debt management emerges as another critical aspect of Nigeria's fiscal strategy. Despite intentions to explore foreign borrowing opportunities, the risk of domestic borrowing escalation looms large. Omosebi highlighted the influence of political factors, such as election cycles, on borrowing patterns. As the government navigates through the budget implementation process, the pressure to meet financial obligations intensifies, potentially leading to increased local borrowing. The uncertainty surrounding revenue streams and external market dynamics further complicates the debt outlook, with risks amplifying in the second half of 2018. In light of these challenges, stakeholders are closely monitoring the government's fiscal decisions and their implications for economic stability. The delicate balance between revenue generation, debt management, and market stability requires a strategic and cautious approach to safeguard Nigeria's financial future. As the government strives to secure approval for the 2018 budget, the spotlight remains on the sustainability of revenue sources and the resilience of the economy in the face of evolving market conditions.