Nigeria’s monthly expenditure declines to N1.3trn, as fiscal deficit hits N727bn
The expenditure of the Nigerian Federal Government declined to N1.3 trillion according to a report released by the Central Bank of Nigeria (CBN).
According to the latest monthly economic report from the CBN, the federal government’s aggregate expenditure declined modestly by -3 percent m/m to NGN1.3 trillion outperforming the budget benchmark of NGN1.8trn.
Recall that President Bola Ahmed Tinubu in his inaugural speech as President promised to cut down on the cost of governance.
However, despite the reduction in expenditure for the period in view, capital expenditure increased by 28 percent m/m to NGN370bn. As such, its share of overall spending rose to 27 percent from 21 percent in Jul ’23.
The country also recorded a fiscal deficit of –NGN727 billion in its fiscal operations for Aug ’23. This compares with a fiscal deficit of -NGN816 billion in Jul ’23 and –NGN593 billion recorded in the year-earlier period.
The fiscal deficit implies total revenue minus total expenditure. It refers to the difference between a government’s total expenditure and its total revenue during a specific period, typically a fiscal year. It represents the extent to which a government spends more than it earns. This shortfall is often financed through borrowing, which can have profound effects on an economy and its stock markets.
The narrower fiscal deficit m/m was mainly due to a 10 percent m/m increase in the FGN’s retained revenue to NGN618 billion in Aug ’23. Despite the m/m rise in revenue, the retained revenue still fell short of the monthly budgeted benchmark of NGN920 billion.
The fiscal deficit over the 8M ’23 period implies a deficit to GDP ratio of c.3.2 percent which is currently tracking below the 6.1 percent envisaged in the budget.
Turning to the revenue drivers, the m/m increase in revenue was driven mainly by increases of 30 percent m/m and 12 percent m/m in revenue distribution from the federation account and FGN revenue to NGN191 billion and NGN244 billion, respectively.
Retained revenue also benefitted from a NGN141 billion inflow from exchange rate gains, around 10 percent lower than the exchange rate gain registered in Jul ’23.
Notably, non-debt and debt service components of recurrent expenditure declined by -3 percent m/m and -19 percent m/m to NGN458billion and NGN434billion, respectively.
Following the decline in debt service cost, the debt service to revenue ratio fell to around 70.2 percent in Aug ’23 from 95.3 percent in the previous month.
Cumulatively, the FGN’s retained revenue and expenditure amounted to NGN3.7 trillion and NGN8.6 trillion over the 8M period to Aug ’23, implying a fiscal deficit of NGN4.9 trillion.
Recall that the Debt Management Office (DMO) in its recent financial update noted that Nigeria’s total public debt experienced a slight uptick, reaching N87.91 trillion at the end of September 2023, up from N87.38 trillion recorded in June.
The DMO’s comprehensive report, released on Wednesday, encompasses the combined domestic and external debts of the Federal Government, all 36 state governments, and the Federal Capital Territory.
Despite the overall increase in public debt, the DMO highlighted a notable decrease in the country’s total external debt, which fell from $43.16 billion in June to $41.59 billion by September 30, 2023.
This reduction is attributed to the redemption of a $500 million Eurobond and the commencement of repayments on the $3.4 billion loan secured from the International Monetary Fund (IMF) during the height of the COVID-19 pandemic, with $413.855 million already paid towards the principal.
Conversely, the domestic debt saw a rise of N1.80 trillion, which the DMO considers a moderate increase.The DMO emphasised that the servicing of these debts, alongside other financial obligations, underscores the Federal Government of Nigeria’s (FGN) dedication to meeting its debt responsibilities.
The report also pointed out that the initiatives and measures taken by the President to boost revenue generation are crucial for maintaining Nigeria’s fiscal stability.
The government’s commitment to debt servicing and proactive fiscal management are seen as vital steps in ensuring the nation’s economic health and its ability to meet future financial commitments.
According to the report, “External Debt decreased due to a redemption of a $500 million Eurobond and the payment of $413.855 million
as first principal repayment of the $3.4 billion loan obtained from the International Monetary Fund in 2020 during COVID-19.
“The servicing of these Debts in addition to other Debts, are clear demonstrations of the FGN’s commitment to honouring its debt obligations. Notwithstanding, Mr President’s initiatives and actions towards revenue generation remain important for Nigeria’s overall fiscal balance.”
