August 22, 2023/FBNQuest Research
Today, we take a look at the recently released budget implementation report (BIR) for Q3 ’22, produced by the Budget Office of the Federation in conjunction with the Office of the Accountant-General of the Federation. The report shows that the fiscal operations of the federal government (FG) resulted in a fiscal deficit of NGN1.7trn in Q3 ’22. Cumulatively, the amount translates to a fiscal deficit of NGN6.0trn for the 9M ’22 period. The amount exclude the budget for government-owned enterprises (GOEs), as well as amounts for multilateral and bilateral project-tied loans. .
The FG’s retained revenue totalled NGN4.3trn as of 9M ’22. This implies a revenue shortfall of NGN1.9trn relative to the pro-rata budget benchmark of NGN6.2trn.
Notably, the FGN’s share of oil revenue for the 9M ’22 period totalled a paltry NGN873bn, substantially underperforming the pro-rata benchmark of NGN1.6trn.
However, the FGN’s share of non-oil revenue which amounted to NGN1.8trn, beat the budget benchmark by 9%, primarily because of a strong performance by companies’ income tax (CIT) which totalled NGN963bn compared to the budget expectation of NGN626bn.
In contrast to revenue, the FG’s expenditure performance closely tracked the budgeted sum. Total expenditure amounted to NGN10.3trn, only slightly behind the NGN10.8trn envisaged in the budget.
In line with historical trends, recurrent expenditure took up about 78% of the total expenditure at almost NGN8.0trn and was 6% ahead of the budget target. Current transfers of NGN615 billion were somewhat more than the NGN613 billion budgeted for the period.
Conversely, capital expenditure stood at NGN1.6trn, well below the allocated budget of NGN2.7trn for the period.
Debt service cost totalled NGN4.2trn, representing 53% of total expenditure, implying a debt-service-to-revenue ratio of 99%.
In a bid to boost revenue, the President earlier this month inaugurated a fiscal policy and tax reforms committee. While we await the committee’s recommendations, we strongly encourage the government to focus on revitalizing the stagnant productivity of the nation’s oil sector.
