Nigeria’s Revenue and Infrastructural Gap
Esther Adegunle (ACMA, CGMA)
Associate Director| Economist| Leader| Author & Writer| Solving Africa’s youth unemployment
Date of first publication: 20th November, 2019
Brilliant Citizen: I hear Nigeria may be in a revenue or debt crisis, please tell me more….
Economist: For a fact, Nigeria has not earned as much as we earned some years ago because of the global fall in oil prices. With oil revenue accounting for over 80% of our revenue, there was a crash in our revenue.
Brilliant Citizen: That’s true, I remember the crash in oil prices between 2014 and 2016, from over a $100 per barrel to less than $40 per barrel. But over the years our government has worked hard to improve the revenue and we are earning more in revenue now…
Economist: Ok let’s look at the data to confirm. In naira terms, yes you are right , Nigeria’s revenue increased from NGN5.6 Trillion to NGN7.1 Trillion between 2012 and 2018. But remember the devaluation occurred in 2016 reducing the value of the naira in dollar terms.
Brilliant Citizen: What is devaluation please?
Economist: Devaluation is the official reduction in the value of a country’s currency relative to other international currencies. Specifically, in 2016, $1 was exchanged for N199, by 2017, one needs N306 to get $1.
Brilliant Citizen: Ohhh I understand now.
Economist: So in dollar terms, between 2012 and 2018, Nigeria’s revenue dwindled from $35.45 billion to $23.15 billion
Brilliant Citizen: Wow that’s a huge drop. But if we spend our revenue in Nigeria, should it matter if revenue dropped in dollar terms
Economist: Well, it does, remember a large percentage of our revenue is earned in dollars from oil. So, if the value reduced in the major source currency, then we should be concerned. Also, Nigeria is heavily dependent on the use of foreign goods and services. We import basic things from food items to clothing items to house hold items.
Brilliant Citizen: But we don’t use government’s revenue for that, we use our own money!
Economist: You are somewhat correct, but government does pay its federal, state and local staff. Even for non-salary payments like infrastructure, like building roads and power, as much as the government may be paying in naira, the engineering/ infrastructure firms need to import a large number of their inputs. Hence, they will charge the government using the dollar exchange rate. Also, the government has debts to pay in foreign currency too…
Brilliant Citizen: Ok now I agree Nigeria’s revenue is truly dwindling, what makes it a crisis if any?
Economist: Our revenue is too small to cater for a population of an estimated 200 million people! Also, government’s responsibilities continue to increase, by next year, the implementation of the new minimum wage will significantly increase its spending.
Brilliant Citizen: I think all we need the government to do is build infrastructure, they should give us power, good roads and health facilities and the rest we can do it on our own.
Economist: Exactly brilliant citizen, but….
Brilliant Citizen: But what again?
Economist: Our revenue is too small to provide all these things…
Brilliant Citizen: You mean the $23.15 billion dollars is not sufficient for these important things!
Economist: Aside the fact that government has other obligations aside infrastructure, Nigeria needs to spend $100 billion* yearly on infrastructure for the next 30 years for the country to meet its infrastructure needs. So even if the government spent all of its revenue on infrastructure, it will not be sufficient!
Brilliant Citizen: Maybe we should not be focusing on government’s revenue to fund the infrastructure?
Economist: Another brilliant one, what are the other sources of infrastructural funding?
Brilliant Citizen: Well, can the private sector assist?
Economist: Yes, the private sector can work with the government in Public Private Partnerships (PPP). Also, the government can borrow to fund the infrastructure gap?
Brilliant Citizen: More debt aka “gbese”? We appear to be borrowing too much already
Economist: Calm down, we will discuss on debts soon
Brilliant Citizen: Well, it is essential the country funds the infrastructure gap. We certainly need power, good roads and functioning hospitals to improve the lives of citizens like me and to make Nigeria a more livable place.
Economist: I agree with you, I have an appointment to catch… Let’s talk more about debts the next time we meet.
Brilliant Ciizen: Mi o fe gbese oooo (I don’t want debt ooo)
* National Integrated Infrastructure Master Plan (NIIMP)
Post-Sales Excellence | Customer Success Manager | Business Value Driver
4yVery great read, like all of your other work! Keep it coming 👏🏼👏🏼👏🏼
Investment Professional | Project Finance | Energy Infrastructure
4yMy pleasure That is fine Will do that right away!
Investment Professional | Project Finance | Energy Infrastructure
4yThis is really enlightening Esther Superb story telling. Where is the 'gbese' article by the way?
Strategy Consultant
4yI like the format in which your article came about. it helps build a better picture of how the naira devaluation is pushing us into debt. Even worse for our Monoeconomy the hit in demand for oil sad thing is the government keeps borrowing with the intention of debt service leading us into a 'gbese crisis' I strongly believe PPP is feasible! I believe even a layman can understand the debt situation from this. thank you for sharing your thoughts M'aam