In the first four months of 2024, the Federal Government’s deficit spending has risen by 2.05 percent year-on-year (YoY) to N1.99 trillion, compared to N1.95 trillion during the same period in 2023.
This modest increase, though seemingly small, highlights the ongoing fiscal challenges faced by the government as it navigates a complex economic environment.
This was contain in the Central Bank of Nigeria’s (CBN) economic reports for the period.
According to the report, January saw a significant uptick of 3.6 percent, with the deficit reaching N1.06 trillion, a sharp increase from the N1.1 trillion recorded in December 2023. However, this increasing trend was temporarily halted in February, when deficit spending dropped by 25.6 percent to N788.64 billion. Yet, this dip was short-lived as March brought a 4.4 percent rise, pushing the deficit to N823.91 billion. The momentum continued into April, with a slight 0.1 percent increase to N824.79 billion.
The expansion of the deficit in April can be traced back to a 0.55 percent month-on-month (MoM) decline in the federal government’s retained revenue, which fell to N419.91 billion from N422.23 billion in March.
The CBN attributes this revenue shortfall to lower receipts from exchange gains, which have been a crucial component of the government’s revenue streams.
“The fiscal operations of the Federal Government of Nigeria in April led to an expansion in the fiscal deficit,” the CBN noted.
“Provisional data showed that primary and overall deficits rose to N260.98 billion and N824.79 billion, respectively, from N249.43 billion and N823.91 billion in the preceding month.”
The decline in retained revenue was stark, falling 0.55 percent from the previous month and missing the monthly benchmark by a staggering 74.29 percent. This drop was primarily due to reduced exchange gains, which had previously bolstered the government’s revenue.
On the expenditure side, the government also faced challenges. Aggregate spending decreased by 0.12 percent in April, amounting to N1, 244.71 billion, which is 48.10 percent lower than the projected spending of N2, 398.12 billion. This decline in expenditure was largely driven by a reduction in capital spending, which saw recurrent and capital expenditures accounting for 84.5 percent and 6.30 percent of the total expenditure, respectively, while transfer payments made up the remaining 9.2 percent.
The fluctuations in deficit spending and the decline in revenue highlight the ongoing financial pressures the federal government is grappling with. As the year progresses, these challenges will continue to shape the nation’s fiscal landscape, raising questions about the sustainability of current spending levels and the effectiveness of revenue-generation strategies.
