CBN: FG recorded N488.24bn fiscal deficit in April

TRACKING ___The Federal Government recorded a fiscal deficit of N488.24 billion in its operations in April this year, the Central Bank of Nigeria (CBN) has said. The apex bank disclosed this in its April 2020 Economic Report released yesterday. According to the report, “The fiscal operations of the Federal Government in April 2020 resulted in a deficit of N488.24 billion compared with the N181.27 billion benchmark and its levels of N854.12 billion and N690.54 billion in March 2020 and April 2019, respectively.”

The CBN attributed the moderation in the overall fiscal deficit in April, relative to comparable periods, to the 16.3 per cent increase in revenue and the 29.6 per cent decline in expenditure. The regulator said that although the current deficit level is already significantly above the benchmark, “it is expected to deteriorate further in the coming months,owing to the pessimism surrounding the infection curve of COVID-19 and the slowdown in economic activities, which are likely to induce extra-budgetary spending, funded by new borrowings.”

It stated that the total retained revenue of N285.66 billion recorded in April 2020 was 59.3 per cent below the benchmark, adding that: “A breakdown of the revenue components showed that all the revenue heads were significantly below their budget benchmarks.” The CBN, however, noted that while April 2020 revenue exceeded collections in March 2020 by 16.4 per cent, it fell short of the collections in April 2019 by 14.8 per cent.

The CBN further stated: “Aggregate expenditure of the Federal Government in April 2020, fell below its budget benchmark and levels in March 2020 and the corresponding period of 2019. The decline was due to delays in capital releases, moderation in overhead costs, occasioned by the lockdown of government offices, and consensual cessation of interest obligations due to the COVID-19 pandemic. “At N773.90 billion, Federal Government expenditure in April 2020 was 12.3 per cent below its benchmark, and 29.6 per cent and 24.6 per cent below aggregate spending in March 2020 and April 2019, respectively.”

The regulator noted that the upward trajectory of the total debt outstanding of the Federal Government in April was driven by rising fiscal deficits. “At N24,522.05 billion, the total debt stock of the FGN as at March 31, 2020 rose by 5.3 per cent and 16.9 per cent, relative to N23,295.07 billion and N20,974.29 billion, in the preceding quarter and the corresponding period in 2019. External and domestic debt obligations accounted for 40.7 per cent and 59.3 per cent of the total debt stock, respectively. Interest payment obligations amounted to N779.73 billion as at end-March 2020.

FGN bond issues accounted for 72.7 per cent of total domestic debt, while multilateral and commercial loans jointly represented 86.1 per cent of total external debt,” it said. According to the CBN, given the ongoing pandemic, the government’s fiscal position in April 2020 was relatively less precarious, compared to its position in March 2020 and April 2019. It pointed out that revenue in the month of April 2020 was well realised before the lockdown and border protection came into effect.

The apex bank, however, noted that rising debt profile and increasing interest obligations “arouse concerns about the medium to long term sustainability of fiscal policy.” “Looking ahead, if the current COVID-19 restrictions persist, government revenue is likely to further decline, while recurrent expenditure is projected to rise, considering the imperative of supporting businesses, workers and vulnerable groups. Consequently, fiscal balances are expected to deteriorate with the Federal Government compelled to embark on new borrowings to finance its increasing obligations,” it said.