IMF flags 2% of GDP off-budget spending in Nigeria’s public....

The International Monetary Fund (IMF) has disclosed that Nigeria failed to capture public expenditure equivalent to about 2 per cent of its Gross Domestic Product (GDP) in recent official budgets, warning that the omission understates the country’s actual fiscal deficit and financing requirements.

The IMF Resident Representative in Nigeria, Christian Ebeke, disclosed this on Wednesday during an engagement with business executives in Lagos.

According to him, the Fund’s assessment found that a significant volume of government expenditure, particularly capital projects executed outside the formal budget framework, was not reflected in official budget documents and implementation reports.

“So far, we think that there are about 2 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,” Ebeke said.

He explained that the omission creates a gap between Nigeria’s reported fiscal deficit and its actual borrowing needs, making the government’s fiscal position appear stronger than it is.

According to the IMF official, incomplete reporting also complicates fiscal and monetary policy coordination because policymakers do not have a comprehensive picture of the country’s public finances.

Ebeke noted that Nigerian authorities have begun addressing the issue by reviewing and revising recent budget laws to incorporate previously unrecorded expenditures, although updated budget implementation reports are still required to provide a clearer picture of government finances.

He stressed that improving fiscal transparency remains critical, warning that off-budget spending also raises concerns about procurement processes, accountability and public financial management.

The IMF said comprehensive reporting of all public expenditure would eliminate the statistical discrepancy between reported fiscal deficits and the government’s actual financing needs while strengthening fiscal oversight and improving policy coordination.

According to the Fund, transparent budget reporting is essential for accurately assessing public investment, enhancing accountability and providing investors with greater confidence in Nigeria’s fiscal management.

The findings suggest that Nigeria’s fiscal deficit could be larger than officially reported because some government expenditures have been financed outside the approved budget framework.

The disclosure comes as the IMF, in its latest Article IV Consultation, commended Nigeria’s recent macroeconomic reforms, including foreign exchange liberalisation and the removal of fuel subsidies, saying they have helped improve macroeconomic stability and boost investor confidence.

However, the Fund cautioned that the benefits of the reforms have yet to translate into broad-based improvements in living standards and warned that Nigeria remains exposed to external risks, including geopolitical tensions and volatility in global commodity markets.

The IMF also recently advised caution over Nigeria’s proposed plan to raise $5 billion through a derivatives-based financing arrangement with First Abu Dhabi Bank, noting that such transactions are often complex and may lack sufficient transparency.