The Federal Government’s (FG) deficit spending surged by 28% Year-on-Year (YoY) to ₦12.1 trillion in the first ten months of 2024, compared to ₦9.8 trillion recorded during the same period in 2023.
This figure exceeded the 2024 budget deficit target of ₦9.8 trillion by a significant 31%, according to data from the Central Bank of Nigeria (CBN) Monthly Economic Reports.
Despite the deficit hike, FG’s revenue grew by 36% YoY, driven primarily by a substantial 54.5% YoY increase in inflows to the Federation Account. Revenue collections to the Federation Account reached ₦20.214 trillion in the first ten months of 2024, up from ₦13.079 trillion in the same period of 2023.
The revenue trajectory displayed notable growth throughout 2024. From ₦4.973 trillion in Q1, Federation Account inflows rose by 28.4% Quarter-on-Quarter (QoQ) to ₦6.388 trillion in Q2, followed by a 7.5% QoQ increase to ₦6.865 trillion in Q3. However, revenues fell Month-on-Month (MoM) in October by 7.9%, settling at ₦1.988 trillion.
FG’s retained revenue also saw notable improvements, reaching ₦6.86 trillion in the first ten months of 2024, a 36.6% increase from ₦5.02 trillion in the same period of 2023. However, October’s retained revenue stood at ₦763.79 billion, 53.23% short of its target but 6.07% higher than the preceding month.
Expenditure Trends
Federal expenditure followed a fluctuating trend, growing by 17.8% QoQ to ₦6.7 trillion in Q2’24 from ₦5.6 trillion in Q1. However, Q3 expenditure fell by 16.4% QoQ to ₦5.6 trillion. In October 2024, expenditure rose by 28.4% MoM to ₦1.83 trillion, attributed largely to increased capital spending.
The October 2024 CBN Economic Report highlighted that “provisional aggregate expenditure in October was 28.43% above the previous month but 23.6% short of the ₦2.4 trillion target.” The rise in expenditure was driven by higher capital spending, which increased by ₦463.49 billion but fell short of its target by 44.03%.
The fiscal deficit widened notably in 2024 due to disproportionate expenditure growth relative to revenue. In Q1, deficit spending stood at ₦4.18 trillion and rose marginally by 1.9% QoQ to ₦4.26 trillion in Q2. However, it declined by 23% to ₦3.3 trillion in Q3. October’s deficit spending was recorded at ₦361.89 billion.
According to the CBN, the fiscal balance expanded in October, with the primary and overall deficits widening by ₦362.85 billion and ₦361.89 billion, respectively. The report attributed this expansion to a “higher increase in expenditure relative to revenue,” emphasizing the need for improved fiscal management.
Revenue Distribution
In October, the net balance of ₦1.298 trillion from federally collected revenue was allocated to the three tiers of government: the federal government received ₦424.87 billion, states ₦450.96 billion, and local governments ₦332.63 billion. An additional ₦90.42 billion was allocated to the 13% Derivation Fund for oil-producing states. *Net disbursements were 7.9% higher than the previous month but fell 43.76% short of the targeted amount.
The fiscal challenges underscore the urgent need for the FG to enhance its fiscal space through diversified revenue streams and a broadened tax base. Non-oil revenue sources contributed significantly to the rise in retained revenue, but reliance on volatile revenue streams poses risks.
The CBN emphasized that “broadening the tax base and diversifying revenue streams” is critical to reducing fiscal deficits. Strategic investment in infrastructure and public services must be balanced with sustainable fiscal policies to avert an economic downturn.
The sharp rise in deficit spending highlights the pressing fiscal management challenges facing the Federal Government. While revenue growth has been commendable, exceeding ₦20 trillion for the first time, expenditure outpacing revenue remains a key concern.
