The Federal Government of Nigeria experienced fiscal deficits of N930.8 billion in the first two months of 2023, as reported by the Central Bank of Nigeria (CBN).
The CBN’s Monthly Economic Report for February 2023 revealed that the fiscal deficit expanded due to a decrease in retained revenue.
A fiscal deficit is a shortfall in a government’s income compared with its spending. The government that has a fiscal deficit is spending beyond its means
In January, the fiscal deficit stood at N417.75 billion, which increased to N513.05 billion in February, representing a 22.8 percent rise. However, it remained 16.2 percent below the budget benchmark.
The report highlighted that the overall fiscal deficit expanded as a result of a 16.4 percent surge in provisional Federal Government of Nigeria (FGN) capital expenditure and a 7.7 percent fall in FGN retained revenue.
Oil Revenue
The decline in accretion into the federation account was attributed to a 32.3 percent decrease in February compared to the previous month, primarily due to a significant 60.2 percent fall in oil revenue. This decline led to the expansion of the overall fiscal deficit by 22.8 percent.
Federation receipts in February reached N1.04 trillion, which was 32.3 percent below the level recorded in January and 34.3 percent lower than the budget target of N1.58 trillion.
The decrease in receipts was mainly attributed to reduced collections from petroleum profit tax and royalties. Oil revenue was severely affected, plummeting to N308.07 billion, representing a 60.2 percent decline from the previous month.
Non-Oil Revenue
Non-oil revenue also experienced a decline, falling short of the preceding month and the monthly target by 3.7 percent and 7.4 percent, respectively, at N730.21 billion. The decrease was primarily attributed to a 10.5 percent decline in collections from corporate tax due to the seasonality associated with its payments.
Combating Revenue Decline
These fiscal deficits and the decline in oil revenue pose significant challenges to the Federal Government’s budgetary planning and execution. The government will need to explore strategies to address the decrease in revenue and effectively manage expenditures to ensure fiscal stability and economic growth
