The Federal Government of Nigeria spent N6.17 trillion more than it earned in 2020, leaving its fiscal deficit at 4 percent of GDP. Nigeria is faced with the risk of recording the biggest budget deficit in its history next year if actual revenues continue at the run rate of the past five years, BusinessDay’s analysis of budget implementation data shows.

President Muhammadu Buhari in his budget proposal to lawmakers on Thursday said the Federal Government was targeting revenues of N10.13 Trillion and a deficit of N6.258 Trillion in 2022. However, if actual revenues look anything like what they have consistently done in the past five years, which is 55 percent of the budget on average, then Nigeria could be left with only N5.57 Trillion in revenues. That then leaves Abuja with a deficit of N10.82 Trillion, the highest ever and equivalent to a full year’s entire budget. The budget for 2020 for instance was N10.8 Trillion.

“Nigeria is treading on a dangerous path with the continued rise in deficit which will eclipse the target in the budget given the unrealistic target set for 2022,” Ayodeji Ebo, an economist and head of retail investment at Lagos-based Chapel Hill Denham said. We need to cut down on non-debt recurrent expenditure and find more creative ways to increase revenues to suppress the deficit, otherwise Nigeria’s economic situation will get worse and there will be little or nothing left for critical capital expenditure,” Ebo said.

Nigeria’s non-debt recurrent expenditure is however not slowing down, at least not next year. Buhari revealed plans on Thursday to spend as much as N6.83 trillion on non-debt recurrent expenditure, which includes personnel costs and overhead, in 2022, 41.7 percent of the total budget. That’s the single largest expenditure item in the budget and equates to double of Nigeria’s total revenue in 2020. The figure is also higher than the N5.35 Trillion budgeted for capital expenditure and debt service of N3.61 Trillion.

“The budget for non-debt recurrent expenditure throws up concerns over the high cost of governance in Nigeria,” a consultant for one of the big four consulting firms told BusinessDay on condition of anonymity as he was not authorised to speak on the matter. A developing country with the limited resources Nigeria has should never spend the bulk of its budget on salaries and overhead costs when there are huge infrastructural gaps waiting to be addressed,” the person said.

Nigeria’s poor revenue performance has made analysts criticise the government for raising the bar each year despite obvious challenges in attaining revenue targets. Unrealistic revenue targets have often left the country with a much bigger deficit than planned. The Federal Government of Nigeria spent N6.17 trillion more than it earned in 2020, leaving its fiscal deficit at 4 percent of Gross Domestic Product (GDP) – the highest in 21 years, according to Central Bank data analysed by BusinessDay.

The fiscal deficit, which is the difference between expenditure and revenue, widened to 6.1 percent of GDP in the first quarter of 2021, with analysts projecting 5 percent by year-end. Nigeria’s ever rising fiscal deficit is yet another sign of the government’s ailing finances and makes a mockery of Abuja’s insistence to continue with a wasteful petrol subsidy regime that gulps north of a trillion naira per annum among other overly expensive ventures of a supposedly cash-strapped government.

The budget proposal is predicated on an oil price of $57 per barrel and daily oil production of 1.88 million barrels a day. This includes condensates of 300,000 to 400,000 daily. Nigeria is also yet again expecting money (N63.38 Billion) to come from Grants and Aid despite receiving nothing from this source since 2018, according to budget implementation reports available on the website of the finance ministry.

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