According to the Central Bank of Nigeria’s Quarterly Statistical Bulletin, the fiscal deficit of the Federal Government (FG) expanded by 52.85% to NGN 12.87 trillion in the 2023 fiscal year, representing 5.6% of GDP. This significant increase according to analysts at Cordross Capital marks a notable shift from the NGN 8.42 trillion deficit recorded in the previous fiscal year, which accounted for 4.22% of GDP. The highlights a widening deficit primarily attributed to higher fiscal expenditure, which surged by 40.70% to reach NGN 18.84 trillion, outweighing the growth in retained revenue, which rose by 19.88% to NGN 5.97 trillion.
The report also highlights an upswing in fiscal revenue which was largely driven by independently generated revenue and exchange rate gains. However, the surge in aggregate expenditure was propelled by substantial increases in both capital expenditure, which soared by 130.69% to NGN 4.36 trillion, and recurrent expenditure, which climbed by 25.83% to NGN 11.50 trillion.
Despite the notable increase in the fiscal deficit, it is worth highlighting that the actual deficit for 2023 was 6.60% lower than the budgeted deficit of NGN 13.78 trillion. This variance can be attributed to aggregate expenditure being lower than the approved budget expenditure of NGN 24.82 trillion, despite retained revenue falling short of the budgeted estimate of NGN 8.63 trillion.
Looking ahead to 2024, analysts anticipate that FG’s retained revenue will underperform the budgeted estimate of NGN 15.95 trillion, primarily due to a shortfall in oil revenue. Additionally, higher debt service costs, fueled by an increase in interest rates, are expected to push up FG’s expenditure further. As a result, the baseline expectation is for the fiscal deficit to reach NGN 14.26 trillion or 5.37% of GDP (including Government-Owned Enterprises) in 2024. This analysis underscores the ongoing fiscal challenges faced by Nigeria, highlighting the need for prudent financial management and strategic planning to mitigate risks and ensure sustainable economic growth.
