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Investing in Human Capital for Nigeria's Future (English)

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.

Details

  • Author

    Joseph-Raji,Gloria Aitalohi, Timmis,Emilija, Meky,Muna Salih, Rufai,Mistura Adedoyin, Loevinsohn,Benjamin P., Pinto,Sangeeta Carol, Odutolu,Ayodeji Oluwole, Ajiboye,Ayodeji Gafar, Pradhan,Elina, Abu-Ghaida,Dina N., Mohammed,Aisha Garba, Okunmadewa,Foluso, Pandey,Priyanka, Coulibaly,Souleymane, Carneiro,Francisco Galrao, Konjhodzic,Indira, Benmessaoud,Rachid

  • Document Date

    2018/11/21

  • Document Type

    Working Paper

  • Report Number

    132316

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    Nigeria,

  • Region

    Africa,

  • Disclosure Date

    2018/11/22

  • Disclosure Status

    Disclosed

  • Doc Name

    Investing in Human Capital for Nigeria's Future

  • Keywords

    Micro, Small and Medium Enterprise; oil price; upstream oil and gas; Capital Adequacy Ratio; Tax Policy and Administration; access to foreign exchange; out of school child; total fertility rate; oil and gas export; economic burden of malaria; current account balance; oil sector; external reserve; human capital outcomes; Exchange Rates; growth and development; tight monetary stance; Oil & Gas; domestic revenue mobilization; high oil price; short-term capital inflows; information and communication; tax policy reform; balance of payment; current account surplus; net oil revenue; international poverty line; government bond yield; barrels per day; sanitation and hygiene; value added tax; consumer confidence index; basic social service; primary school age; exchange rate instability; banking sector stability; gross domestic product; money market rate; public sector action; errors and omission; consumer price index; commercial bank credit; fuel price increase; exchange rate stability; per capita income; open market operation; impact of conflict; parallel exchange rate; public debt stock; flow of credit; private sector lending; social protection system; official exchange rate; education and health; trade and investment; fixed income market; human capital development; direct government intervention; human capital stock; return on asset; growth in agriculture; Internally Displaced Person; emerging market economy; price of oil; long term investment; real growth rate; total public debt; foreign exchange liquidity; domestic debt instrument; inflation; business environment; economic diversification; sectoral growth; Oil Export; real gdp; federal government; broad money; fiscal revenue; agricultural growth; nominal income; development partner; Fuel Subsidies; fiscal deficit; Host Communities; oil output; treasury bill; boom-bust cycle; real sector; petroleum industry; oil dependency; social outcome; Macroeconomic Stability; market volatility; financial account; external borrowing; financial situation; net credit; Job Creation; government revenue; political uncertainty; base year; fiscal space; basic price; portfolio inflow; Macroeconomic Resilience; state expenditure; consumer demand; collect revenue; Real estate; domestic borrowing; positive growth; private spending; church leaders; budget revenue; banking industry; vocational skill; social accountability; capital account; community organizer; disruptive technology; data gaps; agriculture sector; economic recovery; export growth; investment inflow; ongoing conflicts; government support; import restriction; young people; federal revenue; cement industry; international standard; debt sustainability; government priority; oil reserve; private enterprise; tax system; capital flight; private capital; investment requirement; vaccination coverage; external balance; strategic objective; economic model; infrastructure facility; capital remains; investment platform; domestic security; widespread exploitation; market pressure; traditional leaders; portfolio investors; output shock; public expenditure; external policy; domestic shock; debt portfolio; external position; negative shock; high unemployment; trade balance; wash water; market price; financial indicator; teacher knowledge; investment good; bond rate; inflationary pressure; consumer expectation; high inflation; real income; aggregate demand; education level; liquidity condition; government expenditure; government budget; import growth; regulatory uncertainty; distribution list; general elections; bond issue; policy option; foreign portfolio; liquidity management; government operation; intervention rate; macroeconomic performance; currency swap; income components; retail rate; call payment; internet data; oil companies; payment arrears; persistent risk; government security; direct intervention; agricultural sector; oil company; implicit subsidy; food component; national accounting; large population; comparator country; budget execution

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Citation

Joseph-Raji,Gloria Aitalohi Timmis,Emilija Meky,Muna Salih Rufai,Mistura Adedoyin Loevinsohn,Benjamin P. Pinto,Sangeeta Carol Odutolu,Ayodeji Oluwole Ajiboye,Ayodeji Gafar Pradhan,Elina Abu-Ghaida,Dina N. Mohammed,Aisha Garba Okunmadewa,Foluso Pandey,Priyanka Coulibaly,Souleymane Carneiro,Francisco Galrao Konjhodzic,Indira Benmessaoud,Rachid

Investing in Human Capital for Nigeria's Future (English). Nigeria Biannual Economic Update Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/346771542864299850/Investing-in-Human-Capital-for-Nigerias-Future