Nigeria: Federal Government Records N1.5 Trillion Fiscal Deficit in Two Months

Recent figures from the Central Bank of Nigeria (CBN) reveal that the Federal Government of Nigeria experienced a fiscal deficit of N1.54 trillion in the months of July and August 2023.

According to the CBN’s monthly economic report for August, the Federal Government incurred fiscal deficits of N818.53 billion and N726.85 billion in July and August, respectively.

The report states, “The provisional fiscal deficit of the FGN, at N726.85 billion, contracted by 11.0 per cent and 19.1 per cent, relative to the level in the preceding month and the proportionate target for the month, respectively. The lower deficit reflected a decline in interest payments during the period.”

The CBN notes an increase in gross federation account revenue due to improvements in oil earnings. At N1.69 trillion, the federation account receipts exceeded the previous month’s level by 1.7 per cent but fell short of the benchmark of N1.76 trillion by 3.9 per cent.

The enhanced performance is attributed to increased collections from production sharing contracts, the 2023 interim dividend payment by the Nigerian National Petroleum Company Limited, and higher receipts from customs and excise duties and FGN independent revenue.

In terms of composition, non-oil revenue remained dominant, constituting 81.5 per cent, while oil revenue accounted for the remaining 18.5 per cent.

Oil revenue, at N314.38 billion, surpassed the July 2023 level by 27.0 per cent, primarily driven by higher receipts from production sharing contracts and dividends from NNPCL. However, it fell short of the N803.63 billion target by 60.9 per cent.

Non-oil revenue, totaling N1.38 trillion, was 2.7 per cent below the July 2023 level but exceeded the monthly target by 43.8 per cent. This reflects a robust performance in corporate income tax (CIT), customs and excise duties, and value-added tax (VAT), signaling improvements in tax administration, increased economic activities, and seasonality in tax returns.

The CBN reports a net balance of N966.11 billion distributed by the Federal Account Allocation Committee among the three tiers of government after statutory deductions and transfers. In August 2023, the federal, state, and local governments received N374.49 billion, N310.68 billion, and N229.41 billion, respectively. Additionally, a balance of N51.54 billion was allocated to the 13 per cent Derivation Fund for Oil-Producing States.

While net disbursement in August 2023 exceeded the level in July by 6.5 per cent, it fell short of the monthly target by 11.4 per cent.