FG’s 2023 budget underperformed in first five months – CBN

THE federal government’s revenue and expenditure underperformed between January and May this year, negatively impacting economic development, the Central Bank of Nigeria (CBN) has said.

A member of the monetary policy committee (MPC) of the apex bank, Adeola Adenikinju, disclosed this in personal statements by the MPC members from the July 2023 meeting.

According to Adenikinju, the federal government’s retained revenue stood at N1,673.15 billion, lower than the pro-rata target of N1,968.12 billion.

“This was due to the underperformance of FAAC (Federal Account Allocation Committee) receipts, Gross independent revenue,” he explained.

The ICIR can report that the allocation committee, responsible for reviewing and adopting the allocation of funds to states of the federal government of Nigeria, had shared a total of N3.629 trillion to the tier of government between January and May.

FAAC shared N750.174 billion to the governments in January, N722.677 billion in February, N714.629 billion in March, N655.932 billion in April, and N786.161 billion in May, The ICIR had reported.

Of the total distributed revenue of N3.629 trillion in the review months, the federal government received N1.373 trillion.

In January, it received N277.334 billion; in February, N269.063 billion; in March, N276.141 billion; in April, N248.80 billion; and in May, N301.889 billion.

Similarly, Adenikinju hinted that the federal government’s total expenditure as of May 2023 was N4,769.26 billion, representing 27.8 per cent lower than the budget estimate of N6,606.02 billion.

“The shortfall came mainly from allocation for debt service, interest on Ways and Means, and capital expenditure,” he explained.

He further hinted that the overall budget deficit was reduced negatively by -18.15 per cent in the review period.

“The underperformance of the budget is especially felt in the capital expenditures, thus impacting negatively on economic development,” the MPC member said.

Highlights of the 2023 budget indicate a total revenue estimate of N10.49 trillion; aggregate expenditure, inclusive of gross operating expense and project-tied loans, projected to be N21.83 trillion; overall budget deficit of N11.34 trillion to be financed through domestic sources of N7.04 trillion, and foreign sources of N1.76 trillion; and debt service cost of about N6 trillion.

While the monetary and financial market indicators showed evidence of liquidity excess in the economy, annualised growth rates of Net Foreign Assets and Net Domestic Assets components also exceeded the provisional levels.

He said, “The rise in FAAC in July because of the petrol subsidy removal and narrowing of the FX market rates must be managed so as not to increase the liquidity in the economy.”

In July, FAAC reported a total gross revenue of N1.746 trillion, which indicated that more money came into the purse of the federal government.

In that same month, President Bola Tinubu said the federal government had saved N1 trillion in two months in funds from the fuel subsidy removal.

The immediate past administration had spent over N11 trillion on petrol subsidies, which many analysts had argued favoured the rich more than the poor masses.

Nigerian National Petroleum Corporation, now NNPC Limited, has been the sole supplier of petroleum products to the Nigerian market under which subsidies rained.

“The rise in FAAC overtime would help in managing the recourse of the FG and Subnational units on debts to finance government activities. This would also reduce Ways and Means finance and eventually reduce inflationary pressures from the monetary side.

“The FG and some states have also announced different packages of interventions to boost household incomes, expand agriculture output in the medium to long term, shift demand from petrol to other substitutes like CNG and support transportation costs. The FG has also announced other tax incentives to reduce costs of production for firms, several agricultural support initiatives, as well as several subsidised credits to different categories of firms, especially the MSMEs in the economy,” Adenikinju added.

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