The Federal Government’s (FG) deficit spending rose sharply by 28% year-on-year (YoY) to N12.1 trillion in the first ten months of 2024, up from N9.8 trillion recorded in the same period in 2023. This figure surpassed the government’s 2024 deficit target of N9.8 trillion by 31%, according to data from the Central Bank of Nigeria (CBN).
This increase occurred despite a notable 36% YoY rise in FG’s revenue, driven by a 54.5% surge in revenue allocations to the Federation Account during the period.
Federation Account Revenue Growth
Revenue to the Federation Account totaled N20.214 trillion from January to October 2024, compared to N13.079 trillion during the same period in 2023. The quarterly breakdown showed significant increases:
- Q1 2024: N4.973 trillion
- Q2 2024: N6.388 trillion, representing a 28% quarter-on-quarter (QoQ) rise.
- Q3 2024: N6.865 trillion, a further 7.5% QoQ increase.
However, in October 2024, revenue fell month-on-month (MoM) by 7.9% to N1.988 trillion.
Fluctuations in Deficit Spending
The FG’s deficit spending fluctuated across quarters:
- Q1 2024: N4.18 trillion
- Q2 2024: N4.26 trillion, a 1.9% QoQ increase.
- Q3 2024: N3.3 trillion, a 23% QoQ decline.
- October 2024: N361.89 billion, reflecting significant moderation in monthly spending.
Expenditure Patterns and Economic Insights
Expenditure rose by 17.8% QoQ in Q2 2024 to N6.7 trillion but declined by 16.4% to N5.6 trillion in Q3 2024. In October, spending surged by 28.4% MoM to N1.83 trillion, attributed primarily to increased capital spending.
The CBN’s October 2024 Economic Report highlighted that higher capital investments drove this increase, with capital expenditure rising by N463.49 billion compared to September. However, capital spending remained 44.03% below the government’s target.
Revenue Retention and Fiscal Challenges
FG’s retained revenue in October rose to N763.79 billion, marking a 6.07% increase from the previous month. However, this figure was 53.23% below the target, reflecting ongoing fiscal pressures.
The overall fiscal balance showed a widening deficit, with both primary and overall deficits expanding by N362.85 billion and N361.89 billion, respectively. This expansion resulted from expenditures outpacing revenue growth.
CBN Recommendations and Policy Implications
The CBN emphasized the need to broaden Nigeria’s fiscal space by diversifying revenue streams and expanding the tax base. This is critical to addressing the structural imbalance between revenue and expenditure, which continues to drive the country’s rising fiscal deficit.
As Nigeria grapples with fiscal challenges, the government faces growing pressure to manage expenditures effectively while ensuring sustainable revenue growth to stabilize its economic trajectory.
