CBN report: FG’s fiscal deficit skyrockets to N3.7trn in five months

In the first five months of 2023, the Federal Government of Nigeria has reported a fiscal deficit of N3.68trillion, according to a recent report by the Central Bank of Nigeria.

The report highlights concerns from the Monetary Policy Committee regarding the combination of low revenue and high fiscal deficit.

Committee member, Mike Obadan emphasised the need for the government to reform its expenditure in order to address the significant fiscal deficit.

Obadan also noted that the fiscal deficit is a structural factor that has been contributing to the rise in inflation, particularly due to the monetary methods used to finance it.

“The fiscal deficit of the country is a structural factor that has continued to drive inflation upwards. In the first five months of 2023, the Federal Government recorded a fiscal deficit of -N3.7trillion and this has implications for inflation considering the monetary methods of financing it.”

He added, “However, deeper and broader reform of public expenditure is imperative. The new government needs to beam its searchlight on the structure of public expenditure with a view to eliminating unproductive and wasteful expenditures.

“This means that the government should carry out meaningful fiscal consolidation to complement the Central Bank’s tight monetary policy stance aimed at reining in the apparently stubborn inflation.”

According to the economic report for Q1, 2023 released by the CBN, in first quarter of 2023, “A decomposition of FGN spending showed that recurrent expenditure, capital expenditure, and transfers accounted for 84.6, 9.8 and 5.6 per cent, respectively.”

An MPC member, Omamegbe, Mo’, stated that, “The combination of declining revenues and increasing expenditures has led to a growing fiscal deficit, necessitating borrowing and potentially fuelling inflationary pressures.

“The underperformance of the oil sector, coupled with unsustainable fuel subsidies, further exacerbates the fiscal issues.”