The Ministry of Finance is pushing for a tightening of fiscal policy over the forecast period, as laid out in its 2011-13 Medium-Term Fiscal Framework and Mr Jonathan's recently delivered 2011 budget speech. The aim is to reduce the fiscal deficit that built up in 2009-10 as the government attempted to mitigate the impact of the global slowdown with a loosening of fiscal policy. However, the administration is expected to find it hard to curtail expenditure in 2011 as pressure grows for ministries to launch high-profile projects, but it is likely to have more success in 2012-14, especially if capital expenditure is better managed. However, even then the administration will have few options open to it to make sharp cuts in public spending without upsetting trade unions. The government will also face mounting pressure from cash-strapped state governments for greater access to their share of any windfall earnings from oil and gas. The federal government will try to maintain its large share of income against the clamour for greater decentralisation of Nigeria's finances, but it is likely to have to bow to some of the states' demands and raise their allocations.

Total revenue is likely to continue to increase steadily throughout the forecast period, in line with robust economic growth, although the gradual decline in international oil prices from 2012 will mean that revenue as a share of GDP will fall. However, better expenditure control should mean that the government is able to bring down the fiscal deficit, albeit only slowly, from 5.9% of GDP in 2010 to 4.2% of GDP by 2014. Fresh elections due in 2015 are likely to push up expenditure and, consequently, raise the fiscal deficit to 4.5% of GDP.

The budget deficits expected during the forecast period are not likely to be large enough to endanger overall economic stability, but they are likely to generate some inflationary pressures. Although the deficits during the forecast period will continue to be financed largely by domestic borrowing, the government has also indicated that it intends to access external sources. A debut Eurobond was successfully launched in January and based on this success, the government is expected to return to international capital markets in 2012-15.