MON 11 OCT, 2021-theGBJournal- According to the H1-21 Budget Implementation Report (BIR) released by the Budget Office of the Federation, the FGN’s actual retained revenue (NGN2.31 trillion) grossly underperformed the prorated budgeted revenue (NGN3.32 trillion) by 30.4%.
The underperformance was due to a 46.5% decline in oil revenue (23.3% of total actual revenue during the period) compared to the prorated budget (NGN1.01 trillion) as the impact of low crude oil production continues to mask the rally in oil prices. Besides, there were no inflow from stamp duties (vs prorated budget: NGN250.00 billion) and grants (vs prorated budget: NGN177.43 billion).
Actual expenditure (NGN5.81 trillion) was 0.7% ahead of the prorated budget (NGN5.76 trillion) as recurrent debt expenditure was 21.5% higher than the prorated budget (NGN1.66 trillion), reflecting the interest on CBN’s Ways & Means (NGN587.56 trillion) which the FGN did not make provision for in the 2021FY budget.
Accordingly, the actual deficit settled at NGN3.48 trillion in H1-21 – 42.5% higher than the prorated budget. At the present run rate, the budget deficit could widen to c. NGN7.00 trillion by year-end. However, we think the recent Eurobond issuance and ongoing domestic borrowings may reduce the FGN’s reliance on the CBN over the rest of the year.
Meanwhile, Recent data published by the Debt Management Office (DMO) revealed that Nigeria’s public debt stock increased by 7.1% q/q to NGN35.47 trillion in Q2-21 (Q1-21: NGN33.11 trillion).
We highlight that the debt stock increase was due to a 9.9% q/q and 5.4% q/q increase in the external and domestic borrowings, respectively. While the rise in the domestic debt stock was in line with the increase in (1) FGN’s bond issuance (+6.2% q/q) and NTB (+15.0% q/q) during the period, we highlight that the increased external borrowing reflects a 3.0% q/q and 1.6% q/q increase in the multilateral and bilateral debt stock, respectively.
Barring the securitisation of the outstanding CBN’s Ways and Means, we expect the total public debt stock to hit NGN38.72 trillion by year-end in line with the additional borrowing by the States and FGN to fund their 2021FY fiscal operations – estimated at NGN5.80 trillion.-With Cordros Research
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