The federal government of Nigeria’s fiscal deficit surged to N4.53 trillion in the second quarter of 2024, up from N3.88 trillion in the previous quarter.
This is according to information contained in the Central Bank of Nigeria’s economic report for the second quarter of 2024, seen by Naijaonpoint.
In simple terms, a fiscal deficit happens when a government’s spending exceeds its revenue from taxes and other sources. It means the government is spending more money than it’s bringing in.
To cover this gap, the government often borrows money, which can lead to an increase in public debt.
According to the report, while the deficit saw a notable rise, the federal government’s revenue remittance increased only marginally to N2.3 trillion.
This figure represents a 57.66% increase from the first quarter but still falls 52.49% short of the target for the period, prompting a heavy reliance on deficit financing.
There have been growing concerns over the government’s rising deficit, which pushes the federal government to rely on loans to meet its obligations and manage debt service.
In the past, the federal government used the Central Bank’s Ways and Means facility to cover revenue shortfalls.
However, the Tinubu administration announced an end to this approach, aiming to curb prior misuse and adopt a more disciplined fiscal strategy.
However, such a method often leads to an increase in the money supply, which could further fuel inflationary pressures.