In February 2023, the Federal Government experienced a significant increase of 22.8 percent in deficit spending compared to previous months which can be attributed to a substantial decline in oil revenue during that period.

According to the recently released Monthly Economic Report (MER) for February 2023 by the Central Bank of Nigeria (CBN), the deficit for the month amounted to N513.05 billion, bringing the total deficit for the first two months of 2023 to N931 billion.

The report highlights a significant decline in the oil sector, which experienced a 60 percent plunge from N774.15 billion in January to N308.07 billion in February.

Similarly, non-oil revenue also witnessed a 3.7 percent decline to N730.2 billion during the same period. As a consequence of these factors, the revenue accrued to the Federation Account in February experienced a substantial decline of 32.3 percent.

In addition, the Central Bank of Nigeria (CBN) reported that the expenditure side of fiscal operations further exacerbated the deficit position. Expenditure during the period experienced a 5.9 percent increase, amounting to N991.6 billion.

The CBN stated: “At N1.038 trillion, federation receipts were below the level in January by 32.3 per cent. Similarly, it was below the budget of N1.580 trillion by 34.3 per cent.

“The decline relative to January was attributed to a fall in collections from Petroleum Profit Tax and Royalties. Oil revenue, at N308.07 billion, was 60.2 per cent below receipts in the preceding month.

“The outcome was driven, largely, by the 60.5 per cent decrease in collections from Petroleum Profit Tax and Royalties. Similarly, at N730.21 billion, non-oil revenue, was below the level in the preceding month and the monthly target by 3.7 per cent and 7.4 per cent, respectively.

“The decrease was largely attributed to the 10.5 per cent decline in collections from corporate tax on account of the seasonality associated with its payments.

“At N478.57 billion, retained revenue of FGN was below the level in January and the proportionate budget by 7.7 per cent and 42.4 per cent, respectively.

“Provisional aggregate expenditure increased on account of the rise in both recurrent and capital expenditures. Consequently, the provisional aggregate expenditure of FGN at N991.62 billion rose by 5.9 per cent relative to the level in January and was 31.3 per cent below the monthly target.

“A breakdown of the expenditure reveals that recurrent expenditure, capital expenditure, and transfers accounted for 84.7 per cent, 9.5 per cent and 5.8 per cent of total expenditure, respectively.

“At N513.05 billion, the provisional fiscal deficit of the FGN rose by 22.8 per cent relative to the preceding month. “However, it was 16.2 per cent below the budget benchmark.”

Commenting, David Adonri, Vice Chairman, Highcap Srcurities, said: “Full year 2023 appropriation law is a deficit budget. Current administration must obey the law. They can review the budget and send a bill to amend the law.

“However, CBN report covers the period before assumption of office by this new administration. With the removal of fuel subsidy which constitutes a major expenditure item, this administration can cut the deficit if it follows the budget.”

Also, Prof Uche Uwaleke, President, Association of Capital Market Academics of Nigeria, said: “Deficit spending is made worse by rising fuel subsidies and huge debt service burden. This is the major justification for an end to fuel subsidy removal and a halt to contracting new loans that are not self-liquidating.

“This budget cannot attain fiscal consolidation until the challenges posed by fuel subsidy and high debt service obligations are dealt with.”

Commenting also , the Managing Director/CEO, APT Securities & Funds Limited, Mallam Garba Kurfi, said: “It is not a surprise to have deficit as the production of crude oil fall below one million barrel per day.

“The Government should, with immediate effect address the official bunkering of crude oil because from 1.5 million barrel per day, MBPD, reduced to less than one million is a matter that requires urgent attention and need to be given serious attention. This will give immediate relief while looking into other leakages of revenue for blocking.”

Head of Research and Investment at Fidelity Securities Limited, Victor Chiazor, said: “Deficit financing is not really an issue, especially when this financing goes into the production and manufacturing arm of your economy as against deficit financing of consumption.

“We are of the opinion that the deficit position reported by the CBN will significantly drop on the back of the recent subsidy removal by the current administration. The next phase will be to now block other leakages and find smart ways to improve government revenues.

“However, growing government revenues will not be immediate hence we expect this deficit spending to continue in the medium to short term.”

The Managing Director, Sofunix Investment and Communications Limited, Sola Oni, said: “The new administration should reduce the huge cost of governance, channel the anticipated gains from fuel subsidy to provide infrastructure and other indices of enabling environment to enhance productivity.

“Debt reschedule is not new to Nigeria and a lot can be realized from taxation by deploying technology. In 1994, Sweden was nearly bankrupt but by applying spending cut and creative tax generation , the country returned to balanced budget.”