FG’s deficit spending surges to N12.1 trillion amid revenue gains, rising debt pressure – CBN 

This marks a significant jump from the N9.8 trillion recorded during the same period in 2023, according to data from the Central Bank of Nigeria (CBN) Monthly Economic Reports for October 2024.

The increase also meant that the Federal Government surpassed its 2024 Budget deficit target of N9.8 trillion by 31%.

Despite the growth in deficit spending, the Federal Government experienced a 36% YoY increase in revenue during the period, driven largely by higher inflows into the Federation Account. Revenue to the Federation Account surged by 54.5% YoY, rising to N20.214 trillion in the ten-month period of 2024, compared to N13.079 trillion in the same period in 2023. However, expenditure also grew significantly, further widening the fiscal deficit.

“From the federally collected revenue of N1,988.47 billion, a net balance of N1,298.87 billion was distributed to the three tiers of government after accounting for additional revenue and statutory deductions and transfers. The federal, state, and local governments received N424.87 billion, N450.96 billion and N332.63 billion, respectively, while the balance of N90.42 billion was allocated to the 13% Derivation Fund for oil-producing states. Net disbursement was 7.90 per cent above the level in the preceding month but was 43.76 per cent short of the target,” the report says.

The analysis revealed mixed trends in quarterly performance. In the first quarter of 2024 (Q1’24), deficit spending stood at N4.18 trillion, growing marginally by 1.9% quarter-on-quarter (QoQ) to N4.26 trillion in Q2’24. However, Q3’24 witnessed a notable drop of 23% in deficit spending, falling to N3.3 trillion. By October 2024, monthly deficit spending stood at N361.89 billion.

Revenue growth mirrored these fluctuations. From N4.973 trillion in Q1’24, revenue to the Federation Account rose QoQ by 28.4% to N6.388 trillion in Q2’24. The upward trend continued into Q3’24, with a 7.5% increase to N6.865 trillion. However, October 2024 saw a month-on-month (MoM) decline of 7.9%, with revenue dropping to N1.988 trillion.

Expenditure rose significantly during the review period. In Q2’24, expenditure climbed 17.8% QoQ to N6.7 trillion, compared to N5.6 trillion in Q1’24. By Q3’24, expenditure dropped 16.4% QoQ, settling at N5.6 trillion. In October 2024, expenditure rose sharply MoM by 28.4% to N1.83 trillion, driven primarily by increased capital spending.

The October 2024 report highlighted an expansion of the fiscal deficit due to higher spending relative to revenue. The CBN emphasized the need for fiscal reforms, including broadening the tax base and diversifying revenue streams.

Nigeria’s public debt reached alarming levels, standing at ₦134.297 trillion (56.23% of GDP) by the end of June 2024. This figure breached the 40% national debt-to-GDP threshold but remained below the 70% threshold for market-access countries. The rise in public debt was attributed to exchange rate depreciation and new borrowings to finance the 2024 budget deficit.

“Public debt stock was above the 40.00 per cent national threshold at end-June 2024, but remained within the 70.00 per cent threshold for market-access countries. Total public debt outstanding stood at ₦134,297.67 billion (56.23% of GDP), at end-June 2024. The rise was due, largely, to the revaluation effects arising from exchange rate depreciation and new borrowings to finance the deficit in the 2024 budget. A breakdown of the consolidated public debt showed that domestic debt accounted for 52.98 per cent, while external debt constituted 47.02 per cent. Of the consolidated public debt stock, FGN owed ₦118,949.78 billion (88.67%), while state governments owed the balance. A disaggregation of the FGN debt indicated that domestic debt was ₦66,957.88 billion (51.49%), while external debt constituted ₦63,072.68 billion (48.51%). Further analysis showed that FGN Bonds maintained its dominance, with 78.13 per cent of the total domestic debt stock, followed by treasury bills (17.64%), promissory notes (2.50%), and FGN Sukuk (1.63%), while others constituted the balance. Of the total external debt stock, multilateral accounted for 50.41 per cent, commercial (35.87%) and bilateral loans (13.72%). 

“Debt service at end-June 2024 rose by 37.95 per cent to ₦3,419.85 billion, from ₦2,479.00 billion at end-March 2024. This was attributed, primarily, to the repayment of maturing external debt, including commercial, multilateral loans, and the redemption of FGN bonds. A breakdown showed that domestic debt service was ₦1,863.52 billion (54.49%), while external debt service constituted ₦1,556.33 billion (45.51%),” CBN says.