The Federal Government’s deficit spending has seen a sharp increase, rising by 28% year-on-year (YoY) to N12.1 trillion in the first ten months of 2024.
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.
Quarterly Analysis of Deficit Spending and Revenue
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 Patterns and Fiscal Challenges
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.
Public Debt Stock and Service Costs Soar
Nigeria’s public debt reached alarming levels, standing at N134.297 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.
- A breakdown of the debt profile showed that domestic debt accounted for 52.98%, while external debt constituted 47.02%. The Federal Government’s share of the consolidated debt stock was N118.949 trillion (88.67%), with domestic and external debts split nearly equally at 51.49% and 48.51%, respectively.
- Debt service costs also surged, rising 37.95% to N3.419 trillion by the end of June 2024, compared to N2.479 trillion in March. Domestic debt service constituted N1.863 trillion, while external debt service accounted for N1.556 trillion. The increase was primarily due to repayments of maturing external debts and FGN bonds.
“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 N134,297.67 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 N118,949.78 billion (88.67%), while state governments owed the balance. A disaggregation of the FGN debt indicated that domestic debt was N66,957.88 billion (51.49%), while external debt constituted N63,072.68 billion (48.51%). Further analysis showed that FGN Bonds maintained their 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 in end-June 2024 rose by 37.95 per cent to N3,419.85 billion, from N2,479.00 billion in 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 N1,863.52 billion (54.49%), while external debt service constituted N1,556.33 billion (45.51%),” CBN says.
