Nigeria has seen a 29% decrease in its budget deficit from 2023 as a result of the federal government monitoring the realized foreign exchange gains of its banks.
According to The News Chronicles study of statistics from the Central Bank of Nigeria’s (CBN) most recent quarterly statistical bulletin, the nation’s fiscal deficit decreased by 29% to N2.83 trillion in the first quarter of 2024 from N3.96 trillion in the same time in 2023.
In the first quarter of 2021, Nigeria’s budget deficit was recorded as N1.98 trillion.
A government’s revenue shortfall relative to its expenditures is known as a fiscal deficit. According to experts, a smaller budget deficit would make it easier for the government to invest more in capital projects and human resources, which are essential for promoting economic expansion, creating jobs, and lowering poverty.
According to a breakdown of the CBN’s quarterly data bulletin, the nation’s expenditures in the first quarter of 2024 were N1.53 trillion, while its revenue was N1.76 trillion.
From N1.32 trillion over the same period in 2024 to N1.76 trillion in the first quarter of 2024, revenue grew.
Higher inflows will, according to a report by FSDH Research, enhance the budget deficit and debt sustainability ratio in the near run.
As part of an N6.2 trillion ($4 billion) boost to the 2024 budget, the Nigerian presidency announced on July 17, 2024, a one-time 50 percent windfall tax on the foreign-currency revaluation gains of Nigerian banks in 2023. The purpose of this tax is to collect funds for infrastructure and other important spending. The Senate has boosted this by seventy percent.
Finance analyst Emeson Kelvin, who works out of Lagos, stated that the windfall tax on banks is intended to help the government balance its budget.
“With this, the government will have an additional revenue stream for the specified time period and effectively lower the budget deficit,” he stated.
He did, however, point out that bank foreign exchange gains for the entire year 2023 shouldn’t be viewed as an additional revenue stream for the Nigerian federal government.
He stated, “We should anticipate an increase in government spending because I do not believe it will be decreased aside from government address leaks.”
The amount that the Federal Government will get from the bank in relation to their realized foreign exchange gains has not yet been determined, according to Tobi Ehinmosan, macroeconomic and fixed income analyst at FBNQuest Merchant Bank.
“The potential revenue from banks will not meet the country’s rising expenditure plans,” he added.
“We would expect higher revenue gains from improved crude oil production, FX gains from the currency depreciation, and higher revenue collections from non-oil sources if the deficit further reduces,” Ehinmosan said.
In a daily morning note titled “A lower fiscal deficit in Q1 ’24,” published on August 1, FBN Quest analysts stated: “The Federal Government of Nigeria’s revenue purse could potentially be boosted by improved crude oil production, efficient tax revenue mobilisation, and the 70 percent windfall tax on banks’ forex revaluation gains.”
“We expect a rise in FGN’s spending profile as a result of the recent wage growth and higher debt servicing expenses brought on by the government’s need to borrow money to cover its budget deficit due to lower revenue.”
According to FBN Quest analysts, “as such, we expect the FGN’s fiscal operations to remain in deficit in subsequent quarters.”
Pump petrol prices have more than quadrupled to over N600 since President Bola Tinubu announced the removal of fuel subsidies during his inauguration in May of last year. Meanwhile, the value of the naira has fallen as a result of the currency’s floating.
The willing buyer, willing seller paradigm was reinstated and all FX market divisions were combined under the Investors and Exporters window by the Central Bank of Nigeria (CBN).
According to a draft report on the Accelerated Stabilisation and Advancement Plan, which was presented by the Finance Minister and Coordinating Minister of the Economy Wale Edun, Nigeria is expected to spend as much as N5.4 trillion on petrol subsidies by 2018.
“At present rates, expenditure on gasoline subsidies is expected to exceed N5.4 trillion by the end of 2024. This contrasts unfavorably to N3.6 trillion in 2023 and N2.0 trillion in 2022,” the research stated.
The president’s senior adviser on information and strategy, Bayo Onanuga, disregarded the widely circulated document, calling it unofficial and only a policy recommendation that was still being considered at the highest levels.
According to a draft report on the Accelerated Stabilisation and Advancement Plan, which was presented by the Finance Minister and Coordinating Minister of the Economy Wale Edun, Nigeria is expected to spend as much as N5.4 trillion on petrol subsidies by 2018.
“At present rates, expenditure on gasoline subsidies is expected to exceed N5.4 trillion by the end of 2024. This contrasts unfavorably to N3.6 trillion in 2023 and N2.0 trillion in 2022,” the research stated.
The president’s senior adviser on information and strategy, Bayo Onanuga, disregarded the widely circulated document, calling it unofficial and only a policy recommendation that was still being considered at the highest levels.
