Nigeria’s oil sector has seen a significant increase in government revenue, rising from 11% in 2023 to 30% in the first half of 2024. This was announced by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, during a press briefing in Abuja.
The surge in revenue is attributed to the ongoing reforms of the government’s financial management systems, which have led to more efficient and effective revenue collection, although the benefits have not fully translated into broader economic stability.
Edun noted that the recent improvements in oil revenue stem from a larger effort to mobilize non-oil revenue, which also saw a 30% increase over the first half of 2023. This achievement surpassed the 2024 budget target without any increase in taxes, demonstrating the government’s success in enhancing its fiscal management.
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“The government’s determination to mobilize non-oil revenue has consistently delivered impressive results.
“For the half-year 2024, non-oil revenue surpassed the revenue in the first half of 2023 by 30 percent above the 2024 budget target without any increases in taxes,” he said.
The increase in oil production and revenue was expected to boost forex inflows, easing pressure on the naira and improving FX liquidity in the market. Analysts said that higher oil exports would lead to increased foreign currency earnings, which would then bolster the Central Bank of Nigeria’s (CBN) reserves, providing a buffer against currency volatility. However, this anticipated relief has not been realized to the extent needed, as structural issues within the economy and the global oil market dynamics continue to pose challenges.
Edun emphasized that addressing Nigeria’s budget deficit remains a top priority for the government’s economic team. The 2024 budget deficit target has been set at 4.1% of Gross Domestic Product (GDP), a marked improvement from the 6.1% deficit recorded in 2023. On an annualized basis, the deficit is currently at 4.4%, indicating progress toward fiscal consolidation.
Meanwhile, Edun reported a significant reduction in Nigeria’s revenue-to-debt service ratio, which has declined from 97% in 2023 to 68% in 2024. This reduction indicates a decreasing debt burden and an overall improvement in the country’s fiscal health.
The Minister attributed this improvement to enhanced revenue collection and the curtailing of leakages in the system. Notably, he said Nigeria has ceased reliance on ways and means advances from the Central Bank to fund its fiscal obligations, marking a critical step towards more sustainable economic governance.
He noted that these improvements are part of a broader strategy to enhance transparency, accountability, and visibility in government spending. This has been achieved through a reconfiguration of the country’s financial processes and procedures, aimed at earning public trust in the government’s fiscal management.
Despite these fiscal gains, the country’s economic challenges continue to deepen as underlined by the poor performance of the naira in the FX market. The declining value of the naira is believed to be a reflection of broader issues, including inadequate forex reserves, relying mainly on oil for revenue, and a high import dependency. These factors continue to exert pressure on the naira, limiting the positive impact of increased oil revenue on the overall economy.
However, the government remains optimistic about the future. President Bola Tinubu has signed several executive orders aimed at stimulating investment in the industry, with the goal of attracting $10 billion in investments. These orders are designed to create a more favorable environment for investors, offering incentives and reforms to boost confidence and encourage capital inflow.
While these measures are still in the early stages of implementation, the government is hopeful that they will lead to substantial progress in the coming year.
Some analysts believe the government’s initiatives are a step in the right direction. However, they note that achieving long-term economic stability will require continued focus on structural reforms, reducing dependence on oil, and enhancing the country’s export capacity.
Economists say that the success of these measures will depend not only on internal policies but also on global economic conditions and the country’s ability to attract and retain investment.