August 7, 2023/FBNQuest Research

Today, we examine the federal government of Nigeria’s (FGN) fiscal operations. According to the CBN’s most recent Quarterly Statistical Bulletin, the FGN’s fiscal operations resulted in a fiscal deficit -NGN4.0trn in Q1 ’23. This compares unfavourably with a deficit of -NGN2.0trn in the previous quarter and -NGN2.2trn in the year-earlier period. Furthermore, the Q1 ‘23 figure represents the highest government fiscal deficit for as far back as we can track.

The FGN’s fiscal operations have consistently maintained a deficit position, and further mirrors the precarious fiscal position of the government.

The wider q/q fiscal deficit was mainly due to a 74% q/q rise in the government’s total expenditure to NGN5.5trn.

The sharp rise in the government’s total expenditure was primarily due to a significant increase in capital expenditure to NGN1.8trn from NGN209.4bn in the previous quarter.

Although recurrent expenditure also increased on a q/q basis, the rise was modest relative to capital expenditure. It increased by +25% q/q to NGN3.7trn from NGN2.9trn in the preceding quarter.

Statutory transfers which more than doubled to NGN269.0bn from NGN130.0bn in the previous quarter, was the primary contributor to the rise in the recurrent expenditure. Also, debt service payments increased by 51% q/q to NGN2.1trn.    

On a positive note, the FGN’s retained revenue increased by 33% q/q to NGN1.5trn in Q1 ’23, marking the highest quarterly revenue since Q3 ’22.

The improved q/q revenue outturn was primarily because of a rise in the FGN’s revenue allocation from the federation account.

We anticipate greater revenue contribution from the federation account due to the recent removal of fuel subsidies and the devaluation of the Naira currency.

As such, going forward, we expect to see reduction in the government’s huge fiscal deficit.