Unrealistic Budgets Widening Nigeria, Others’ Deficits, IMF Warns

Nigeria and other Sub-Saharan African countries are widening their fiscal deficits because many national budgets are built on unrealistic revenue assumptions and spending plans that governments struggle to meet, the International Monetary Fund (IMF) has said.

In a new research paper published on its website, the IMF warned that weak budget credibility across the region is undermining fiscal discipline, debt sustainability and long-term development prospects in several African economies.

The paper, titled Budget Credibility in Sub-Saharan Africa, examined fiscal outcomes in 39 countries between 2021 and 2024 and found that the gap between approved budgets and actual results remains widespread, persistent and structural, rather than temporary.

According to the Fund, many governments in the region routinely record higher-than-planned deficits because revenue projections are often too optimistic, while recurrent expenditure continues to exceed approved levels.

The authors said capital spending is usually the first to be cut when tax collections disappoint or grants and external financing are delayed. They added that deficits are frequently deeper than planned, largely because of optimistic revenue forecasts and overspending on primary current expenditures.

“Capital spending is typically under-executed, especially when tax revenues fall short or grants are delayed.”

“Deficits are frequently higher than planned, driven mainly by optimistic revenue projections and overspending on primary current expenditures,” the authors said.

Spending on wages, subsidies, goods and services, and social transfers often exceeded approved budget limits, worsening fiscal balances.

Capital expenditure, including spending on roads, hospitals, schools and infrastructure projects, was consistently under-executed during periods of fiscal pressure.

The IMF said wages, subsidies, goods and services, and social transfers often go beyond budget ceilings, putting pressure on fiscal balances. It also noted that interest payment obligations are frequently underestimated, further tightening financing conditions and expanding deficits.

The paper described the fiscal slippages across the region as “persistent and often large”, saying the pattern points to deeper institutional weaknesses rather than isolated forecasting mistakes or short-term economic shocks.

The report said recurrent spending regularly overshoots budget limits, while infrastructure and development projects are often delayed, reduced or abandoned when governments come under fiscal strain. Roads, hospitals, schools and other capital projects, it noted, are commonly affected when revenues fall short or external support is not received on time.

It further found that countries with stronger fiscal institutions tend to record smaller gaps between budgeted and actual outcomes. Nations under IMF-supported programmes were also said to post lower fiscal slippages, reflecting the effect of external monitoring and policy discipline.

By contrast, low-income and fragile states recorded larger deviations, which the Fund linked to weaker administrative capacity and tighter financing constraints. The paper also said fiscal discipline tends to weaken during election periods, when governments face stronger spending pressures and depart from approved spending plans.

The IMF stressed that budget credibility goes beyond forecasting accuracy, saying it also reflects the quality of institutions, fiscal governance, expenditure controls and policy implementation capacity.

The warning comes as the Fund had earlier projected a further weakening in Sub-Saharan Africa’s fiscal position in 2026, even though firmer commodity prices may provide some relief to external balances in parts of the region.

It projected the region’s median fiscal deficit to widen to 3.2 per cent of GDP.

In Nigeria, the development comes against the backdrop of a rising borrowing plan for 2026.

Recall that the Federal Government increased its planned borrowing to N29.20 trillion after expanding both the proposed budget size and the fiscal deficit.

The new borrowing figure is N11.31 trillion higher than the earlier estimate of N17.89 trillion.

President Bola Tinubu had earlier asked the Senate to approve an increase in the 2026 Appropriation Bill by N9 trillion, raising the proposed budget from N58.4 trillion to N67.4 trillion.