Nigeria Biannual Economic Update, Fall 2018 : Investing in Human Capital for Nigeria's Future
The Nigerian economy remains dependent on the small oil sector (under 10 percent of GDP) for the bulk of its fiscal revenues and foreign exchange earnings. This makes Nigeria’s balance of payments and government budgets vulnerable to volatilities i...
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| Language: | English |
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/346771542864299850/Investing-in-Human-Capital-for-Nigerias-Future http://hdl.handle.net/10986/31008 |
| Summary: | The Nigerian economy remains dependent
on the small oil sector (under 10 percent of GDP) for the
bulk of its fiscal revenues and foreign exchange earnings.
This makes Nigeria’s balance of payments and government
budgets vulnerable to volatilities in oil prices. Indeed,
growth and investment in Nigeria have been negatively
impacted by repeated oil-price driven boom-bust cycles. The
oil price shock of late 2014 and its aftermath pushed the
economy into recession and precipitated a major budgetary
crisis at the national and state levels which brought to
light the longer-term trend of weak domestic revenue
mobilization. Nigeria’s weak revenue mobilization has major
implications for growth and development, including for
improving its dire social service delivery outcomes. Thus,
the country needs to take concrete steps to break its oil
dependency to improve its economic and social outcomes. Oil
revenues are recovering with increasing oil prices, but
distributions to the tiers of government are constrained by
the unbudgeted fuel subsidy and other deductions. The fuel
subsidy, no longer an explicit first line deduction from oil
revenues, mostly benefits the affluent and it is also
widely-known that a portion of Nigeria’s imported petrol is
smuggled out to neighboring countries where petrol is more
expensive. The constrained net oil revenues, combined with
non-oil revenues that are constrained by limited tax policy
reforms and are thus stagnated (relative to GDP), limit
overall revenue realization, thus constraining budget
execution and the build-up of fiscal buffers. The growth in
the public debt stock between the first half of 2017 and the
first half of 2018 was mainly attributable to the increased
Eurobond issuances, some of which were used to liquidate
costlier domestic short-term debt. The Nigeria Economic
Recovery and Growth Plan (ERGP) 2017-2020 aims to achieve
macroeconomic stability and economic diversification and
there is thus the need to accelerate its implementation
progress. The special focus topic for this report is on
human capital development in Nigeria. Studies show that
between 10 and 30 percent of the differences in per capita
income between countries can be attributed to human capital.
The economic burden of malaria alone in Nigeria, accounting
for direct and indirect costs excluding mortality, is
estimated at 13.5 percent of GDP. However, in the quest for
sustainable growth, Nigeria, like many other countries, has
underinvested in human capital. While physical capital
remains critical, it does not fully account for improvements
in growth. |
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