The federal government’s fiscal deficit expanded in April 2024, reaching ₦824.79 billion, a slight increase from the previous month’s figure of ₦823.91 billion. This widening deficit is primarily attributable to a decline in government revenue, particularly from exchange gains, according to the Central Bank of Nigeria (CBN).
The CBN’s April 2024 Monthly Economic Report revealed that the government’s expenditure exceeded its revenue by ₦824.79 billion in April, exceeding the budgeted deficit of ₦764.19 billion for the period. The primary deficit, which excludes interest payments, also rose to ₦260.98 billion from ₦249.43 billion in March.
Declining Revenue Strains Government Finances
The government’s revenue declined by 0.55 percent month-on-month in April, falling to ₦419.91 billion from ₦422.23 billion in March. This decline was primarily driven by lower receipts from exchange gains, as the government’s foreign exchange earnings decreased.
The CBN noted that the government’s retained revenue, which excludes transfers to other government entities, was 74.29 percent below the monthly benchmark in April. This shortfall further exacerbated the fiscal deficit and limited the government’s ability to fund its spending priorities.
Government Expenditure Remains High
While government revenue declined, expenditure remained relatively high in April. Total expenditure amounted to ₦1.246 trillion, a slight decrease from ₦1.244 trillion in March. However, the government’s capital spending was significantly below the projected level, suggesting that it may have prioritized recurrent expenditure over investments.
Tight Monetary Policy Impacts Consumer Credit
The CBN’s tight monetary policy, aimed at curbing inflation and supporting the naira, has had a significant impact on consumer credit. The outstanding consumer credit balance fell by 53.83 percent to ₦3.8 trillion at the end of April, compared to N8 trillion in the previous month.
The decline in consumer credit was primarily driven by a sharp reduction in personal loans, which fell by 60.79 percent to ₦2.95 trillion. However, retail loans increased by 18.81 percent to ₦856.77 billion.
Implications for the Economy
The widening fiscal deficit and declining consumer credit raise concerns about the government’s ability to finance its development agenda and support economic growth. A large fiscal deficit can lead to higher interest rates, increased borrowing costs, and inflationary pressures.
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Moreover, the decline in consumer credit can hamper economic activity as households reduce their spending. This can have a negative impact on businesses and job creation, further exacerbating economic challenges.
If You Ask Me
The government will need to implement measures to address the widening fiscal deficit and boost revenue generation. This may involve increasing tax collection, reducing wasteful spending, and exploring alternative sources of financing.
The CBN’s monetary policy will also play a crucial role in supporting economic stability. Striking a balance between controlling inflation and promoting growth will be essential in the coming months.
The outlook for Nigeria’s economy remains uncertain, and the government will need to navigate these challenges carefully to ensure sustainable and inclusive development.
