December 29, 2020/Proshare

By FBNQuest Research

The FGN’s revenue has crashed dramatically this year due to the spread of Covid-19, the official response to contain its impact and the related decline in the oil price. These broad trends we noted in our pre-holiday daily note on gross, federally collected revenue for the three tiers of government (Good Morning Nigeria, 24 Dec. ’20). In the FGN’s case, collection of just NGN842bn in Q3 ’20 was far short of the benchmark of NGN1.46trn. In addition to sharp falls in federal collection translated into retained revenue, there were zero ‘other’ receipts whereas the target was NGN508bn for special levies and transfers from special accounts. 

The FGN has set ambitious targets even after twice revising its budget numbers in the face of Covid-19. Not for the first time, it has had to adjust its spending plans mid-year because of underperformance on the revenue side. Aggregate expenditure of N2.13trn in Q3 was 21.2% down on the benchmark (ie the approved budget, pro rata).

The data point to a predictable reduction in capital spending (NGN341bn in the quarter vs the benchmark of NGN622bn).

However, we also see some compression of recurrent expenditure, which totalled NGN1.65trn vs the benchmark of NGN1.97trn. 

Remarkably, personnel spending of NGN669bn in Q3 fell short of the NGN762bn benchmark. It could well prove that the shortfall is smoothed out in Q4.

The brightest point in the data is the interest payment bill of NGN560bn, which compares with the year-earlier figure of NGN812bn and the benchmark of NGN738bn. The CBN commentary notes the moratorium on interest payments by some official creditors, which we take to be a reference to the G20 initiative. There has also been a marked decline in the FGN’s domestic issuance costs.

More detailed but less timely data from the Budget Office of the Federation and the Office of the Accountant-General of the Federation highlight additional interest payments of NGN461bn on Ways and Means in H1 ’20. This appears to be the cost to the FGN of servicing its ‘unfunded’ overdraft with the CBN.

The FGN’s deficit in Q3 amounted to NGN1.29trn, compared with NGN1.25trn the previous quarter and the benchmark of NGN1.24trn.

This CBN data series, as we have previously observed, is regularly revised, and sometimes by a wide margin.

FGN finances (NGN bn)

Sources: CBN; FBNQuest Capital Research