MON, 10 OCT, 2022-theGBJournal| According to the recently released Q2-22 Budget Implementation Report (BIR) by the Budget Office of the Federation, the FGN’s fiscal deficit settled at N5.50 trillion (or 5.97% of prorated GDP) in H1-22 – 77.2% higher than the projected deficit (N3.10 trillion) for the review period.
The increased deficit was primarily driven by a 41.4% shortfall in the FGN’s retained revenue (N2.41 trillion vs prorated budget: N4.12 trillion). We highlight that independent (64.3% underperformance) and oil (40.3% underperformance) revenue contributed a significant chunk of the retained revenue shortfall.
Meanwhile, aggregate expenditure (N7.91 trillion) was 9.6% higher than the prorated budget (N7.22 trillion), driven by higher debt services payments (+31.3% vs prorated budget) and capital expenditure (+33.9% vs prorated budget).
At this run rate, the fiscal deficit could settle at N11.00 trillion in 2022E (Cordros estimate: N9.74 trillion). Given that the external financing conditions are unfavourable, it implies that much of the deficit financing would be channelled towards the domestic debt market amid an increased reliance on the Central Bank of Nigeria’s (CBN) Ways and Means (W&M) advance.
Indeed, the actual W&M from the CBN was N4.61 trillion in 8M-22 (vs 2021FY: NGN4.35 trillion).-With Cordros Research
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