Nigeria’s Fiscal Deficit Edges Up as Revenue Falls Short
Nigeria’s fiscal deficit rose slightly in April, expanding by 0.1% to N824.79 billion from N823.91 billion in March, according to the Central Bank of Nigeria (CBN). This was disclosed in the CBN’s Monthly Economic Report for April 2024, highlighting a continuing trend of fiscal imbalance for the Federal Government.
A fiscal deficit occurs when a government’s expenditures exceed its revenues, creating a shortfall that must be financed through borrowing or other means. The report revealed that the April deficit was 7.92% higher than the budgeted N764.19 billion, underscoring the challenges Nigeria faces in aligning its financial resources with its spending commitments.
The CBN report also showed a significant decline in consumer credit, which fell by 53.83% to N3.8 trillion at the end of April 2024, a sharp decrease from the previous month. The contraction in fiscal space was attributed to a 0.55% month-on-month decrease in retained revenue, which fell to N419.91 billion in April from N422.23 billion in March. The decline in revenue was primarily due to lower receipts from exchange gains.
“The fiscal operations of the Federal Government of Nigeria in April resulted in an expansion in the fiscal deficit,” the report stated. “Provisional data showed that primary and overall deficits rose to N260.98 billion and N824.79 billion, respectively, from N249.43 billion and N823.91 billion in the preceding month. The expanded deficit reflected the sharper decline in retained revenue.”
The report further elaborated that government expenditure in April declined by 0.16% month-on-month to N1.246 trillion from N1.244 trillion in March, driven by reduced capital spending. “The provisional data showed that aggregate expenditure of the FGN declined due to reduced capital spending,” it noted.
“At N1,244.71 billion, provisional data indicated that expenditure was 0.12% below the level in the preceding month, and 48.10% short of the projected spending of N2,398.12 billion. The decline was attributed largely to a reduction in capital outlay in the review period. Further analysis showed that recurrent and capital accounted for 84.5% and 6.30%, respectively, while transfer payments constituted 9.2%.”
Meanwhile, the report highlighted a substantial reduction in consumer credit, which dropped significantly by 53.83% to N3.8 trillion, reflecting a reduced appetite for loans among consumers amid high-interest rates. The fall in consumer credit was largely due to a 60.79% decline in personal loans, which plummeted to N2.95 trillion. In contrast, retail loans experienced an 18.81% increase, rising to N856.77 billion.
“A decomposition indicated that personal loans accounted for 77.48% of the total consumer credit, while retail loans accounted for the balance,” the CBN stated.
The latest economic data underscores the fragile state of Nigeria’s fiscal health, with declining revenues and reduced consumer credit pointing to broader economic challenges. As the government grapples with managing its fiscal deficit, the focus will likely remain on finding a balance between stimulating economic growth and maintaining fiscal discipline.
