July 4, 2024/FBNQuest Research

According to the CBN’s monthly economic report, the Federal Government of Nigeria’s (FGN) fiscal operations resulted in a fiscal deficit of -N1.1trn in January 2024. January’s fiscal deficit is N37m lower than the deficit position of over -N1.1trn recorded in Dec 2023 but is 9% Y-o-Y higher than the -N981bn deficit registered in the year-earlier period. The fiscal deficit for the month was mainly driven by a -47% revenue shortfall of N487bn relative to the pro-rata monthly budget benchmark of N920bn. The fiscal balance underscores the severe fiscal pressures confronting the government.

• The key driver of the revenue shortfall was underperformance in federation account receipts, which came in at N174bn compared with N356bn monthly target primarily due to lower-than-expected oil revenue.
• For context, oil revenue accruing to the federation account amounted to a paltry N317bn compared with a monthly benchmark of N804bn.    
• Additionally, the FGN’s independent revenue came in at N104bn, falling short of the N264bn monthly target.
• On a modestly positive note, the government’s total spending of N1.6trn decreased slightly by -3% M-o-M and was -15% below the N1.6trn monthly expenditure target.
• Recurrent expenditure, which made up around 82% of the FGN’s total expenditure, decreased by -4% M-o-M to N1.3trn, primarily because of a -7% M-o-M decline in debt-service cost to N829bn.
• The debt service cost implies a debt-service-to-revenue ratio of 170% during the month. Notably, the primary balance, which shows the government’s fiscal operations excluding debt-service payments, resulted in a net deficit of -N236bn.
• In line with historical trends, capital expenditure (capex) was the major loser, with a total spend of N198bn compared with a monthly benchmark target of N498bn.
• When annualised, the fiscal deficit in Jan 2024 implies a deficit to GDP ratio of 4.3%, higher than the 3.9% envisaged in the 2024 budget.
• Looking ahead, we expect to see some fiscal slippage over the year, particularly considering the imminent rise in the FGN’s wage bill.