operations of the Federal Government led to a significant 22.8% increase in deficit spending in February, according to data from the Central Bank of Nigeria (CBN). The rise in the deficit was primarily driven by a sharp drop in oil revenue during the period. The CBN reported a deficit of N513.05bn in February, resulting in a total deficit of N931 bn for the first two months of the year. This represents a 16.2% decrease compared to the N613bn budget benchmark.
According to the CBN data, the decline in revenue played a crucial role in the growing fiscal deficit. Federation receipts in February were 32.3% lower than in January, with oil revenue experiencing a staggering 60% plunge. Non-oil revenue also declined by 3.7%. On the expenditure side, provisional aggregate expenditure rose by 5.9% to N991.6 bn during the period. Recurrent spending accounted for a significant portion of the total expenditure, followed by capital expenditure and transfers.
Experts have underscored the importance of the new administration adhering to the provisions of the Fiscal Responsibility Act, which sets a limit of 3% of GDP for the Fiscal Deficit. Despite subsidy payments not being directly funded by the government, the subsidy system has placed a significant burden on the government, resulting in substantial borrowing by the previous administration. Analysts maintain the view that eliminating subsidies would alleviate the debt service burden.