2023 Budget: FG Falls Short of Targets Amid Deepening Fiscal Crisis

The Nigerian Federal Government has experienced a concerning fiscal shortfall during the initial seven months of 2023, as revealed in data extracted from the Medium Term Expenditure Framework for the period 2024-2026, as reported by Infostride News.

This data underscores the current fiscal challenges confronting the government and raises questions about its financial stability.

In accordance with the budget performance statistics disclosed in the report, the federal government succeeded in amassing a total revenue of N5.1 trillion during the first seven months of 2023. This figure falls short of its prorated target of N6.4 trillion, indicating a budget variance of 19.5%.

Furthermore, the government’s overall expenditure during this period amounted to N8.5 trillion, contrasting significantly with the budgeted expenditure of N13.2 trillion for the same period, resulting in a budget variance of 34.9%.

Let’s delve deeper into the data:

**Revenue:**
The principal source of revenue for the government, namely oil revenue, only yielded N813.58 billion, which was notably lower than its budgetary target of N1.3 trillion, representing a significant variance of 37.4%.

As a whole, Nigeria collected a total of N1.6 trillion in oil and gas receipts, falling short of a prorated target of N2.69 trillion. A fraction of this oil revenue is shared with the federal government, constituting the N813.58 billion mentioned earlier.

Conversely, non-oil taxes accumulated a total of N4.69 trillion, surpassing the N4.1 trillion budgeted when prorated. This indicates that, on an annualized basis, the country generated taxes amounting to N8 trillion, which equates to just 3.7% of the GDP.

Other revenue sources, such as revenue from Solid Minerals after derivation and Electronic Money Transfer Levy, contributed N140.79 billion.

The net federation account’s distribution is divided with the federal government receiving 52.68%, while the state and local governments receive 26.72% and 20.6%, respectively. The net VAT pool account distributable to the federal government is 15%, with the state and local governments each receiving 35%.

**Expenditure:**
In terms of recurrent expenditure, the government incurred a total of N7.1 trillion, which includes non-debt recurrent expenditure of N3.2 trillion. Notably, non-debt recurrent expenditure experienced a 33% reduction from the budgeted N4.8 trillion.

Meanwhile, debt service expenditures reached N3.9 trillion, representing a 2.9% variance compared to the N3.8 trillion budgeted. An important distinction lies in the increase in the “Ways and Means” category, which rose from N700 billion to N1.69 trillion.

However, it’s important to note that only about N857.08 billion, equivalent to 25% of the pro-rata budget, has been released for Ministries, Departments, and Agencies (MDAs) for capital expenditure as of July 2023.

The government attributes this performance level, at least partially, to the introduction of the “Bottom-up Cash Plan” arrangement, which became effective in 2023. This approach entails government agencies determining monthly cash requirements based on their actual needs rather than receiving fixed allocations. The primary aim is to enhance capital budget execution. It also involves the establishment of a revenue management team to identify and rectify revenue leakages, consequently increasing internally generated revenues (IGR).

**Implications:**
The fiscal performance of the Nigerian Federal Government during the first seven months of 2023 raises serious concerns that could contribute to a fiscal crisis.

First and foremost, there is a significant revenue deficit, with the government collecting only N5.1 trillion compared to the prorated target of N6.4 trillion, resulting in a 19.5% budget shortfall. This revenue gap poses challenges for financing essential budgetary commitments.

Secondly, the decline in oil revenue, a major source of income for Nigeria, is a cause for alarm. Oil revenue amounted to only N813.58 billion, well below the N1.3 trillion budgeted target. Fluctuations in global oil prices and reduced production may be contributing to this decline, with adverse implications for the country’s economy.

Thirdly, government expenditure during this period exceeded revenue significantly, resulting in a budget deficit. The N8.5 trillion expenditure outpaced income, which may lead to increased borrowing and exacerbate fiscal challenges.

Moreover, a substantial portion of the budget continues to be allocated to servicing debt, limiting the resources available for critical sectors and development projects. This situation underscores the need for careful financial planning and the exploration of alternative revenue streams to ensure the government’s financial stability and ability to meet its obligations.