An Assessment of the Sustainability of Nigeria's Fiscal Deficit: 1970–90

For some time, the size and continuous recurrence of Nigeria's fiscal deficit has been of concern to interested parties. However, no study has so far reported on the build-up and severity of the problem in relation to what may be considered desirable. Adopting the sustainability criterion as the benchmark, this paper provides evidence on the structure and desirability of Nigeria's fiscal deficit profile between 1970 and 1990.|The findings indicate that between 1970 and 1974, the country recorded annually unsustainable deficits, due, perhaps, to the post-civil war reconstruction efforts. The advent of the oil boom in 1974 helped to avert this undesirable trend, and positive fiscal balances were recorded between 1975 and 1979. However, the country has persistently recorded unsustainable annual deficits ever since.|One major factor has been that the oil boom induced a phenomenal increase in government expenditure, which continued after the oil-based revenue profile fell. The second, but related, fact was the huge debt burden, which has grown beyond the debt-service capability of the nation. The results also suggest that the Structural Adjustment Programme (SAP) implemented in 1986 has so far not been of much assistance in addressing the problem. This paper therefore suggests some remedial measures which could help to reduce the fiscal deficit in Nigeria to a sustainable level.