The Federal Government recorded a fiscal deficit of N2.14Tn in its operations in the 2017 fiscal period, figures obtained from the Central Bank of Nigeria have revealed. The figures are contained in the fourth quarter Economic Report of the Apex Bank.
A fiscal deficit occurs when a Government’s total expenditure exceeds the revenue that it generates, excluding borrowings. An analysis of the report showed that the fiscal deficit for the 2017 financial year was lower than the N2.19Tn recorded in 2016.
The report put the total retained revenue of the Federal Government during the period at N2.76Tn, while the expenditure was put at N4.9Tn, resulting in overall operational deficit of N2.14Tn. Investigations showed that the deficit was financed through domestic and foreign borrowings, including issuance of Government Securities.
Further analysis of the report showed that while the Federal Government earned N554.63Bn in the first quarter of 2017, it incurred an expenditure of N1.34Tn, resulting in a first quarter deficit of N782.96Bn after the addition of primary deficit of N158.8Bn.
For the second quarter, the sum of N688.69Bn was earned by the Federal Government, with an expenditure of N1.17Tn, resulting in a deficit of N489.33Bn after adding the primary deficit of N185.74Bn.
The report put the third quarter revenue of Government at N788.56Bn, adding that when matched with the N1.4Tn expenditure for the period, it resulted into a deficit of N618.66Bn.
For the fourth quarter, the Government earned N731.61Bn as revenue. However, with an expenditure of N979.05Bn and a primary surplus of N197Bn, the overall deficit for the quarter was put at N247.44Bn.
The report read in part, “Provisional Federal Government retained revenue for the fourth quarter of 2017 was estimated at N731.61Bn. This was below the proportionate quarterly budget estimate and the receipts in the preceding quarter by 45.8 per cent and 7.2 per cent, respectively.
“Of the total revenue, the Federation Account accounted for 87.2 per cent, while Value Added Tax, Federal Government Independent Revenue and exchange gain accounted for 5.0, 4.5 and 3.3 per cent, respectively.
“The estimated Federal Government expenditure for the fourth quarter of 2017 was N979.05bn. This was below the proportionate quarterly budget estimate of N1.93Tn by 49.5 per cent and the level in the preceding quarter by 30.4 per cent. A breakdown of the total expenditure showed that the recurrent component accounted for 81.7 per cent, while capital and statutory transfers accounted for 9.6 and 8.7 per cent, respectively.
“A further breakdown of the recurrent expenditure showed that the non-debt component accounted for 44.4 per cent, while debt service payment was 55.6 per cent.”
Speaking on the fiscal deficit, finance and economic experts said the budgetary spending of the Government needed to be reduced in a manner that would reflect the rate of revenue inflow. The Director-General, Institute of Fiscal Studies of Nigeria, Mr. Godwin Ighedosa, said, “We have so much relied on Oil revenue in the last 45 years and with the decline in oil revenue, the time has come now for us to review our fiscal position.
“There is a need for a reform of the country’s tax administration system to enable the Federal Government to raise more revenue from Capital Gains Tax. Our tax to Gross Domestic Product ratio is one of the lowest in the world and we need to address that.”
In his comment, the Head of Banking and Finance Department, Nasarawa State University, Dr. Uche Uwaleke, said there was a need for the National Assembly to come up with legislation to improve the level of coordination between fiscal and monetary policy authorities.
He said the law would enable both authorities to effectively come up with the right policy mix in addressing the fiscal challenges facing the economy. He argued that the failure to properly coordinate both fiscal and monetary policies was having negative influences on the economy through deficit financing. Uwaleke added that a weak policy stance in one area could burden the other area and would make the economy to suffer in the long run.