FG deficit spending soars to N12.1 trillion, exceeding 2024 budget target by 31%

Deficit spending by the Federal Government surged to N12.1 trillion in the first ten months of 2024, representing a 28% year-on-year (YoY) increase from the N9.8 trillion recorded in the same period of 2023. This marks a significant 31% overshoot of the government’s 2024 budget deficit target of N9.8 trillion.

The rise in deficit spending occurred despite a 36% YoY increase in government revenue during the period, driven by a robust 54.5% YoY growth in revenue to the Federation Account.

Data from the Central Bank of Nigeria’s (CBN) Monthly Economic Reports revealed that revenue to the Federation Account reached N20.214 trillion between January and October 2024, compared to N13.079 trillion in the corresponding period of 2023.

Revenue and Expenditure Dynamics

Federation Account revenue exhibited consistent growth across the first three quarters of 2024. It stood at N4.973 trillion in Q1’24, rising quarter-on-quarter (QoQ) by 28.4% to N6.388 trillion in Q2’24.

This upward trend continued with a 7.5% QoQ increase to N6.865 trillion in Q3’24. However, October 2024 experienced a month-on-month (MoM) decline of 7.9%, with revenue dropping to N1.988 trillion.

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Overall, Federal Government revenue grew by 36.6% YoY to N6.86 trillion in the first ten months of 2024, up from N5.02 trillion during the same period in 2023. On a quarterly basis, revenue soared by 71% to N2.4 trillion in Q2’24, from N1.4 trillion in Q1’24. However, Q3’24 saw a 4.2% QoQ decline to N2.3 trillion. Revenue in October 2024 was recorded at N763.79 billion.

Expenditure followed a different trajectory. Federal Government spending rose by 17.8% QoQ to N6.7 trillion in Q2’24 from N5.6 trillion in Q1’24. This was followed by a 16.4% QoQ decrease to N5.6 trillion in Q3’24. In October, spending increased MoM by 28.4% to N1.83 trillion, compared to N1.43 trillion in September.

Fiscal Allocations and Challenges

In October 2024, the CBN reported that from the federally collected revenue of N1.988 trillion, a net balance of N1.298 trillion was distributed across the three tiers of government. The Federal Government received N424.87 billion, states N450.96 billion, and local governments N332.63 billion, while N90.42 billion was allocated to the 13% Derivation Fund for oil-producing states.

Despite the rise in retained revenue by 6.07% from the previous month to N763.79 billion, it fell short of the target by 53.23%. Similarly, total expenditure, which rose to N1.83 trillion, remained 23.6% below the target of N2.4 trillion.

Addressing the Deficit

The widening fiscal deficit, which expanded by N361.89 billion in October 2024, reflects the urgent need for fiscal reforms. The CBN emphasized the importance of broadening the tax base and diversifying revenue streams to mitigate fiscal challenges. Increased capital spending, while necessary, remained 44.03% below the target, underscoring the need for better fiscal management.

This sharp rise in deficit spending highlights the importance of strategic financial planning to balance revenue growth with expenditure, ensuring sustainable economic development.