A recent report reveals that Nigeria’s fiscal deficit soared to ₦3.68 trillion in the first five months of 2023. This concerning development has been highlighted in the Central Bank of Nigeria’s report on the Monetary Policy Committee’s personal notes. The committee expressed apprehension over the escalating fiscal deficit amidst dwindling revenue.
Mike Obadan, a member of the Monetary Policy Committee, stressed the urgency of reforming government expenditure to address this substantial fiscal gap. He emphasized that the current fiscal deficit is a structural factor that continues to drive inflation upwards. Obadan further elaborated that in the initial five months of 2023, the Federal Government faced a fiscal deficit of -₦3.7 trillion, a circumstance with potential inflationary repercussions given the methods employed to finance it.
Obadan urged for a comprehensive overhaul of public spending, urging the new administration to scrutinize expenditure structures to eliminate unproductive and wasteful outlays. He advised the government to engage in meaningful fiscal consolidation in tandem with the Central Bank’s stringent monetary policies, which aim to curb the seemingly steadfast inflation.
As per the economic report for Q1, 2023, released by the CBN, the breakdown of Federal Government spending reveals that recurrent expenditure constituted 84.6%, capital expenditure 9.8%, and transfers 5.6%.
Another member of the Monetary Policy Committee, Omamegbe Mo’, noted that the convergence of plummeting revenues and escalating expenditures has resulted in a burgeoning fiscal deficit. This, in turn, has necessitated borrowing and has the potential to stoke inflationary pressures. Mo’ pointed out that the underperformance of the oil sector, combined with unsustainable fuel subsidies, further compounds the fiscal challenges.