Analysts at FBNQuest Research have attributed the country’s rising fiscal deficits to its budgets’ poor revenue performance. The analysts stated this while reacting to the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed’s recent public presentation of the approved 2023 budget.
They pointed out that the total revenue available to fund the Federal Government’s budget as of 11M ‘22 amounted to N6.5trillion, which is about -13 per cent below the pro-rata benchmark. The analysts stated: “The Finance Minister’s public presentation of the approved 2023 budget shows that the FGN’s fiscal operations for the Jan- Nov ’22 period resulted in a fiscal deficit of -N6.4trn, ahead of the prorata figure of -N6.1 trillion. “Despite the large size of the fiscal deficit, the outturn for the period implies an improvement over the broad trend observed over H1’22. According to the Q2 budget implementation report, the FGN recorded a fiscal deficit of -N5.5trn in H1’22 compared with a budgeted figure of -N3.1 trillion.
The difference can be explained mainly by the better revenue performance recorded in H2’22 (ex- Dec) relative to H1’22. “The FGN’s retained revenue (ex- government-owned enterprises) of N5.9trn for 11M ’22 implies a higher revenue inflow of almost N3.5 trillion over the Jul-Nov ’22 period, compared with N2.4 trillion for H1’22.
The total revenue available to fund the FGN’s budget as of 11M ‘22 amounted to N6.5 trillion, around -13 per cent below the pro-rata benchmark.” The analysts, however, noted that while non-oil revenue totalled N2.1 trillion, exceeding the target by 23per cent, oil revenue underperformed, bringing in a paltry N587 billion compared with a budgeted revenue projection of N1.6 trillion for the period. Despite the poor revenue performance, the country’s debt service costs, the financial experts noted, are rising as they exceeded the budget benchmark by 76 per cent.
They also stated that recurrent expenditure and statutory transfers both overshot their pro-rata targets by 23 per cent and 22 per cent, respectively, adding that “for the former, the key drivers were personnel costs and overheads for the ministries’ departments and agencies, which were running ahead of forecasts.” Given the foregoing, the analysts noted: “Following the recent passage of a 2022 supplementary budget of N819 billion, the forecast fiscal deficit for 2022 has been revised upward to N8.2 trillion (4.7% of 2021 GDP) from N7.4 trillion previously. The new 2023 budget forecasts an even higher fiscal deficit of N11.3 trillion.” New Telegraph reports that in its Staff Concluding Statement of the 2022 Article IV Mission on Nigeria released in November last year, the International Monetary Fund (IMF) predicted that Nigeria’s fiscal deficit may widen to 6.2 per cent of its Gross Domestic Product (GDP) in 2022, as a result of continuous fuel subsidy. The Bretton Woods institution also forecast that with the increase in Nigeria’s fiscal deficits and high debt servicing costs, the country’s public debts may increase over the medium term.