January 22, 2024/FBNQuest Research

According to the most recent quarterly economic report from the Central Bank of Nigeria (CBN), the federal government of Nigeria (FGN) recorded a lower fiscal deficit of -NGN2.4trn in Q3 ’23 compared with -NGN2.7trn. Although FGN’s aggregate expenditure declined by -3% q/q to NGN4.0trn, the narrower fiscal deficit was primarily due to an increase of 12% q/q in the government retained revenue to NGN1.7trn in Q3 ’23. The data is published by the CBN but sourced from the Office of the Accountant-General of the Federation. It is worth noting that the data is provisional and subject to revisions in subsequent publications..

Despite the q/q rise in retained revenue, the revenue still fell considerably below the quarterly budgeted benchmark of NGN2.8trn.

The FGN’s actual revenue outturns have consistently fallen short of target due to the FGN’s ambitious revenue projections.

The improved government revenue is mainly due to a higher exchange rate gain, which more than doubled to NGN411bn.

Another contributory factor to the higher revenue turnout was a 32% q/q rise in value-added-tax to NGN130bn.    

Regarding expenditure, the slight drop in the government total expenditure was primarily due to a decline of -10% q/q in recurrent expenditure to NGN2.8trn.  

Although non-debt service cost declined by -4% q/q to NGN1.4trn, the lower q/q recurrent expenditure was mainly due to a decrease of -15% q/q in debt service cost to NGN1.4trn.

Conversely, capital expenditure, which accounted for c.26% of the total expenditure, increased by 19% q/q to NGN1.0trn. However, it fell short of the budgeted target of NGN1.5trn.  

The data also shows a statutory transfer amount of NGN205.8bn and a primary balance (ex-debt service cost) of -NGN970.9bn.

Looking ahead, we expect to see further reduction in the government’s fiscal deficit because of greater revenue contribution from the Federation’s account due to higher exchange rate gain.