Nigeria’s True Fiscal Deficit Bigger Than Reported, IMF Says

…Blames Off-Budget Expenditure For Statistical Gap

…Says Unreported Expenditure Equals 2% Of GDP

Nigeria’s public spending records may be understating the country’s true fiscal position, with expenditure equivalent to about two per cent of Gross Domestic Product (GDP) omitted from recent official budgets, the International Monetary Fund (IMF) has disclosed.

The IMF Resident Representative in Nigeria, Christian Ebeke, made the disclosure on Wednesday while addressing business executives in Lagos, warning that the omission has created a significant statistical discrepancy between Nigeria’s reported fiscal deficit and its actual financing requirements.

According to Ebeke, the unreported expenditure has made the country’s budget deficit appear smaller than the level of borrowing required to finance government activities, thereby distorting assessments of Nigeria’s fiscal health and public investment.

“So far we think that there are about two per cent of GDP of expenditure that were not reported that should be reported and should be recorded, so that this statistical discrepancy will disappear,” he said.
He explained that a substantial portion of the omitted spending is linked to major government projects executed outside the formal budget process, commonly referred to as off-budget expenditure.

The IMF official noted that while such projects may contribute to infrastructure development, failing to capture them in official budget documents and implementation reports weakens fiscal transparency and complicates the assessment of the government’s actual financial position.

Ebeke stressed that the discrepancy not only understates Nigeria’s fiscal deficit but also creates challenges for economic management by limiting policymakers’ ability to accurately coordinate fiscal and monetary policies.

“When expenditure is not fully captured in the budget, it becomes difficult to determine the true size of the fiscal deficit and the actual financing needs of government,” he said, adding that comprehensive fiscal reporting is essential for sound macroeconomic management.

He further warned that off-budget spending raises broader governance concerns, particularly regarding procurement procedures, accountability and legislative oversight.
According to him, transparent reporting of all public expenditure would strengthen investor confidence, improve fiscal credibility and enhance public trust in government finances.

Ebeke, however, acknowledged that Nigerian authorities have begun taking steps to address the reporting gap by repealing and revising aspects of recent budget legislation to incorporate previously unrecorded expenditure.

He said additional work remains, particularly in publishing updated budget implementation reports that fully reflect government spending.

The IMF’s observations come shortly after the Fund released its latest Article IV Consultation Report on Nigeria, which commended the Federal Government for implementing wide-ranging economic reforms, including the removal of fuel subsidies, exchange rate liberalisation and efforts to restore macroeconomic stability.

The Fund said the reforms have strengthened investor confidence, improved external balances and enhanced the resilience of the Nigerian economy.

However, it cautioned that the gains from the reforms have yet to translate into broad-based improvements in living standards, as millions of Nigerians continue to grapple with high inflation, elevated borrowing costs and rising cost-of-living pressures.

The IMF also warned that Nigeria’s economic recovery remains vulnerable to external shocks, including heightened geopolitical tensions in the Middle East and volatility in global commodity markets, underscoring the need for stronger fiscal discipline, improved public financial management and greater transparency in government spending.

Analysts say addressing off-budget expenditure and improving fiscal reporting would provide a clearer picture of Nigeria’s public finances, strengthen policy coordination and reinforce investor confidence in Africa’s largest economy.