Nigeria bursts monthly fiscal deficit target by over 100% in May, signaling burden ahead for 2018 budget

The fiscal operations of the Federal Government resulted in an estimated deficit of N397.74 billion for the month of May 2017, compared with the 2017 provisional monthly budget deficit of N196.40 billion, a more than 100% overshoot, according to the Central Bank of Nigeria (CBN) monthly economic report for the month under review.

The overshoot of the target is not restricted to the month under review alone as it appears to be ongoing, an indication that the provisional deficit of N2.2 trillion would be burst eventually and potentially see a carry over to the 2018 fiscal year, since expected revenues are still limited and far from being realised.

Already, Udoma Udo Udoma, minister of budget and planning, and Kemi Adeosun, the minister of finance, who are currently believed to be planning and working on the 2018 budget with their ministry officials, would be looking at the numbers coming from the CBN data room and worry about the expanding deficit hole that they must look for ways of plugging in the 2018 planning cycle.

Nigerians, largely unaware of the negative impact of their governments running a huge deficit year-on-year, have often not been given the full picture of budget carry overs from one year to another, for decades.

Although there was a 9.7 percent drop in expenditure for the month against the provisional monthly budget estimate, spending in May rose above the level in April by 3.0 percent.

“The estimated total expenditure of the Federal Government, at N583.32 billion, fell short of the 2017 provisional monthly budget estimate by 9.7 percent,” said the CBN, adding however that it rose above the level in April 2017 by 3.0 percent.

Recurrent and capital expenditure were said to have accounted for 61.0 percent and 34.3 percent, respectively, while transfers accounted for the balance of 4.7 percent of the total expenditure.

A breakdown of the recurrent expenditure showed that non-debt obligation was 76.8 percent of the total, while debt service payments accounted for the balance of 23.2 percent.

Analysts specifically attribute the deficit to dwindling receipts, which have fallen below monthly estimates, which they claim would have advised government to slowdown on expenditure; a much difficult exercise given the expenditure profile that is mostly recurrent, especially salaries, which are difficult to cut.

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On revenue, government saw a general decline by almost 60 percent for the month.

“The estimated Federal Government retained revenue for the month of May 2017, at N185.58 billion, was below the monthly budget estimate of N449.60 billion by 58.7 per cent,” the CBN noted, adding that it was also lower than the preceding month’s receipt of N221.48 by 16.2 percent.

Of the total receipt, Federation Account accounted for 67.0 per cent, while FGN Independent Revenue, others/Exchange Gain/NNPC Fund, VAT and Excess Crude recorded 11.7, 9.6, 6.6 and 5.1 per cent, respectively.

Thus allocation to the various tiers of government dropped in tandem as total estimated statutory allocations to the state governments amounted to N147.42 billion, lower than the monthly budget estimate of N282.84 billion by 47.9 percent. It was also said to be below the April allocations of N163.74 billion by 10.0 percent.

Receipt from the Federation Account amounted to N106.78 billion or 72.4 percent of the total statutory allocations. This was below the monthly budget estimate of N210.84 billion by 49.4 percent.

It also fell short of the receipt in April by 15.2 percent. At N40.64 billion or 27.6 percent of the total, allocation to the VAT Pool Account fell short of the monthly budget estimate of N72.00 billion by 43.6 percent. It, however, increased relative to the level in April by 7.7 percent.

Total allocations to local governments from the Federation and VAT Pool Accounts in the month of May stood at N87.77 billion, which was below the monthly budget estimate of N170.92 billion by 48.6 percent. It also fell below the preceding month’s receipt by 8.6 percent.

Allocation from the Federation Account was N59.32 billion or 67.6 percent of the total, while the share from the VAT Pool Account was N28.45 billion or 32.4 percent of the total.