The Federal Government’s expenditure surpassed its accrued revenue in the first half of 2024, resulting in a budget deficit of N4.53 trillion, according to a new report from the budget office.
This deficit spending was driven by a 73.91% increase in expenditure, which offset the impact of improved revenue collection of N8.70 trillion between January and June 2024.
An analysis of the second-quarter budget implementation report, obtained by our correspondent on Sunday, revealed that the deficit was 29.85% higher than the N3.488 trillion recorded in the same period of 2023, but N59.55 billion (1.30%) below the projected half-year deficit of N4.589 trillion.
The report stated that the deficit was financed through domestic borrowing, which has contributed to the nation’s increasing debt profile. Economic analysts have raised concerns over the country’s debt sustainability, emphasizing the urgent need to diversify its revenue base.
In simple terms, a fiscal deficit occurs when a government’s spending exceeds its revenue from taxes and other sources, meaning the government is spending more than it is bringing in.
To cover this shortfall, the government typically borrows money, which leads to a rise in public debt. This gap also highlights a growing reliance on borrowing to fund increasing expenditure, raising concerns about long-term fiscal sustainability and the potential impact on national debt levels.
During the 2024 budget presentation, Finance Minister and Coordinating Minister of the Economy, Wale Edun, outlined plans to reduce the budget deficit to N9.18 trillion or 3.88% of GDP, in line with the threshold set by the Fiscal Responsibility Act of 2007.
He stated that this would be achieved by implementing several strategies, including a thorough review of recurrent expenditures, prioritizing essential spending, eliminating wasteful or unproductive expenditures, streamlining administrative processes, reducing travel costs, and consolidating certain functions.
However, a breakdown of the implementation report indicated a different scenario.
The report noted, “The revenue and expenditure outturn of the Federal Government resulted in a fiscal deficit of N4.529 trillion in the first half of 2024. This was N59.55 billion (1.30%) below the projected half-year deficit of N4.589 trillion. It was also higher than the N3.488 trillion deficit recorded in the first half of 2023. The deficit was financed through domestic borrowing of N4.529 trillion.”
It added, “The sum of N8.702 trillion was received to fund the FGN budget in the first half of 2024. This comprises N2.715 trillion (31.20%) oil revenue and N5.987 trillion (68.80%) non-oil revenue. Revenue receipts increased from N3.586 trillion in the first quarter to N5.115 trillion in the second quarter. However, the total inflow for the first half of the year was N1.097 trillion (11.20%) lower than the 2024 half-year projection of N9.799 trillion but N4.582 trillion (112.22%) higher than the N4.119 trillion reported during the first half of 2023.”
