Nigeria’s fiscal deficit surpasses budget projections, reaches 7.6% of GDP 

This was revealed in the personal statements of Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) members, who voiced concern over the growing gap between revenue generation and spending.

At the start of 2024, the National Assembly approved a budget of N28.7 trillion with a revenue target of N19.5 trillion, leaving a budget deficit forecast of N9.1 trillion equivalent to about 3.8% of GDP.

However, the deficit has surged well beyond projections, with a supplementary budget of N6.2 trillion proposed later in the year, compounding the fiscal strain.

According to MPC member Aloysius Uche Ordu, Nigeria’s revenue collection significantly underperformed, reaching only 37.9% of the year’s target in the first half of 2024.

MPC member Lamido Yuguda also highlighted the consequences of Nigeria’s low revenue base, stressing that it underpins the weak fiscal performance in the first half of the year.

Aloysius Uche Ordu emphasized that Nigeria’s spending priorities leaned heavily toward recurrent expenditures, driven primarily by debt servicing costs.

CBN MPC member Muhammad Sani Abdullahi reiterated the importance of a proactive monetary policy in countering the fiscal deficit’s potential repercussions, especially as discussions on implementing a new minimum wage gain traction.

While members of the MPC acknowledged that the fiscal authority has shown restraint by not resorting to the Central Bank’s Ways & Means financing, concerns remain over how long the government can sustain this stance amid revenue shortfalls and mounting obligations.

The committee noted that heavy reliance on FAAC distributions affects liquidity levels within the banking sector, subsequently impacting the naira exchange rate.

In contrast to Nigeria’s worsening fiscal situation, developments in the external sector offered a glimmer of optimism.

The fiscal challenges Nigeria faces highlight a structural issue in the country’s financial framework, primarily driven by revenue volatility and expenditure imbalances.