The Federal Government ended 2022 with a fiscal deficit of N7.5 trillion or 129% of actual revenue collected.
The government had budgeted a revenue of N9 trillion and a deficit of N5.2 trillion.
This is according to data extracted from the 2022 budget implementation report released by the Budget office.
The level of fiscal deficit brings to the fore the fiscal crisis challenging the country as it continues to struggle with its ability to balance its budget.
According to data from the budget office, the federal government received a total revenue of N5.8 trillion down from N6.7 trillion received in the same period in 2021.
The budget office also confirmed that overall, the N7,523.71 billion deficits recorded in 2022 represent a budget-deficit to GDP ratio of 3.77% which is above the target rate of 3.0% as stipulated in the FRA 2007. The deficit was financed in part through ₦510.21 billion in foreign borrowing and ₦3,654.12 billion in domestic borrowing.
The situation outlined in the report indicates a serious fiscal crisis for the Nigerian federal government, and there are several critical points to note.
Larger-than-Expected Deficit: The fiscal deficit of N7.5 trillion exceeds the government’s budgeted deficit of N5.2 trillion by a substantial margin.
Decreased Revenue: The government’s actual revenue was N5.8 trillion, which is not only less than the budgeted N9 trillion but also less than the N6.7 trillion collected in 2021.
High Expenditure on Recurrent Costs and Debt Service– The government spent a whopping N5 trillion on recurrent non-debt expenditure, with personal costs taking up N3.49 trillion.
Inadequate Capital Expenditure: While recurrent expenses and debt servicing take up most of the budget, the capital expenditure was notably low.
Budget-Deficit-to-GDP Ratio: The budget-deficit-to-GDP ratio of 3.77% is higher than the 3.0% target stipulated in the Fiscal Responsibility Act (FRA) of 2007.
Financing the Deficit: The deficit was financed partly through foreign borrowing of ₦510.21 billion and domestic borrowing of ₦3,654.12 billion.
Large fiscal deficits can contribute to a currency crisis by increasing the money supply, thereby causing inflation and devaluing the domestic currency.
Thus, it is no surprise that Nigeria continues to experience a currency crisis as the expansive money supply pumped into the economy by the government did not lead to economic growth, rather it exacerbated the level of inflation in the country.
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