Nigeria's Budget Is Missing Two Percent of GDP. The IMF Had to Say So Out Loud.

On July 1, at a meeting with business executives in Lagos, the IMF's resident representative in Nigeria said something that deserved a louder news cycle than it got. Christian Ebeke told the room that Nigeria's official budget documents are missing about two percent of GDP in public spending. Not stolen in the way that usually generates headlines. Not misallocated between line items. Simply left out of the paperwork entirely, as if it never happened.

Here is what that actually means, translated out of IMF language. Some of Nigeria's capital spending, the kind that builds roads and power infrastructure and other large projects, gets executed outside the formal budget process. Money moves, contracts get signed and fulfilled, and then none of it shows up in the budget documents or the implementation reports that are supposed to account for it. The result is that Nigeria's reported deficit looks smaller than its actual borrowing need. The country is spending more than the numbers say it is spending, and the gap between those two figures is roughly two percent of the entire economy.

Two percent of GDP is not a rounding error. Depending on which year's figure you apply it to, that is somewhere in the range of two to three trillion naira moving through the Nigerian state with no formal record. Ebeke said Nigerian authorities have started to fix this by revising recent budget laws to bring some of that spending back onto the books, though he was careful to note that updated implementation reports still have not been produced. Started. Still needed. Those two words are doing more work in his statement than most of the sentence around them.

I wrote last week about a man named Adeyemi Adeniyi and a council that received N1.3 billion in this year's budget despite having no legal instrument of establishment. That story got attention because it had a villain, or at least a very entertaining set of competing accusations about who the villain was. This week the IMF handed me a version of the same story with no villain at all, just a number, and I think the number is the more honest of the two.

A fake agency in the budget is a scandal because someone can point at it. Two percent of GDP quietly missing from the budget is not a scandal at all, because there is no single entity to point at. It is just the way the paperwork has been done. And I would argue the second version is the more dangerous one, precisely because it does not generate outrage. Nobody is calling for an ad hoc committee to investigate a statistical discrepancy. Nobody's father is going on record to say the discrepancy is well behaved.

The Open Budget Survey has been tracking exactly this kind of thing for years, and the trend line for Nigeria is not encouraging. The country's transparency score climbed to 45 out of 100 in 2021, then fell to 31 by 2023. Public participation in the budget process, meaning the degree to which ordinary citizens can meaningfully engage with how the budget is built and reviewed, fell even further than that. A country does not need to be caught lying about its budget to score badly on that index. It only needs to make the budget hard enough to verify that nobody outside government can confirm whether it is being told the truth.

That is the throughline connecting this week's story to last week's. In the fake agency case, the failure was that nobody checked whether an entity receiving public money had a legal right to exist. In this case, the failure is that nobody is required to record all the money the government actually spends before calling the budget complete. Different mechanisms, same underlying problem. Nigeria's budget documents are treated as the final word on what the government does with public money, when in practice they are closer to a partial and occasionally inaccurate summary.

The IMF's Article IV consultation, the same one that generated Ebeke's comments, praised Nigeria for macroeconomic reforms that have brought more stability and investor confidence over the past few years. I do not want to pretend that praise is empty. Some of it appears to be earned. But the Fund also said, in the same breath, that the benefits of those reforms have not reached most Nigerians and remain exposed to shocks from outside the country. Read those two findings together and a pattern appears. The government has gotten better at telling a story that satisfies international lenders about macroeconomic stability. It has not gotten equally better at telling its own citizens, in a form they can verify, what is actually being spent and on what.

You cannot hold a government accountable for spending you are not allowed to see. That is not a metaphor. It is a description of how the current system works. Two percent of GDP moved through the Nigerian state last year in a form that neither the National Assembly reviewing the budget nor the citizens paying into it could fully account for. The Fiscal Responsibility Act exists. The oversight committees exist. None of that infrastructure catches spending that was never entered into the record in the first place, because oversight, by definition, requires something to oversee.

What would actually fix this is not complicated to describe, even if it would be difficult to build. Every capital project executed with public money, whatever agency or ministry runs it, would need to be entered into a single implementation report before the fiscal year closes, with real penalties attached for projects that are not. Not a revision after the IMF points it out. Not a repeal of the relevant budget law after the fact. A standing requirement that makes the omission itself the violation, the same way failing to declare income is a violation regardless of whether the income was eventually spent honestly.

I do not know whether that will happen. Nigeria has a habit of fixing the specific gap that got named publicly while leaving the general vulnerability that produced it untouched. The budget law gets revised. The unrecorded spending from this particular window gets folded back into the books. And next year, or the year after, some other two percent finds its way outside the process again, because nothing about how the process works has actually changed. The number will just be smaller, or larger, or attached to a different set of projects, and someone at the IMF will eventually have to point it out again.