CBN: FG Recorded N488bn Fiscal Deficit in April

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Obinna Chima

The federal government’s retained revenue in April 2020 was N285.66 billion, while the government’s total expenditure was N773.91 billion, the Central Bank of Nigeria (CBN) disclosed in its economic report for April.

The report obtained on the CBN’s website yesterday, showed put the deficit in the month under review at N488.25 billion.

“The total retained revenue of N285.66 billion recorded in April 2020, was 59.3 per cent below its benchmark. A breakdown of the revenue components showed that all the revenue heads were significantly below their budget benchmarks. However, the April receipts exceeded collections in March 2020 by 16.4 per cent but fell short of the collections in April 2019 by 14.8 per cent.

“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 observed moderation in the overall fiscal deficit in April, relative to comparable periods, could be attributed to the 16.3 per cent increase in revenue, and the 29.6 per cent decline in expenditure. 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 explained.

According to the report, the revenue profile of the federal government in the month under review, revealed subsisting revenue challenges because of declining oil receipts and low contribution of non-oil revenue.

However, the report showed that driven by the upturns in oil and non-oil revenue components, federally collected revenue in April 2020 rose by 25.4 per cent and 20.1 per cent to N915.28 billion, relative to its levels in March 2020 and April 2019, respectively. However, it was 30.4 per cent below its benchmark.

According to the report, total federal government debt outstanding as at March 31, 2020, stood at N24.52 trillion; with the domestic and external components accounting for 59.3 per cent and 40.7 per cent of the total debt stock, respectively.

It added: “Despite the significant drop in the price of the Bonny Light crude from $32.2 per barrel in March, to $14.3 per barrel in April, coupled with an expected decline in collectable taxes due to COVID-19 restrictions, the federally collected revenue in April 2020, amounted to N915.28 billion.

“The receipt exceeded the collections of N729.64 and N762.16 in March 2020 and April 2019, by 25.4 and 20.1 per cent, respectively. The apparent insulation of April revenue from the adverse effects of COVID19 could be explained by the fact that government revenues usually come with lags, particularly, oil revenue where oil sales contracts sometimes take as much as 90 days to materialise.

“However, relative to the benchmark revenue of N1.316 trillion, collection in April experienced a shortfall of 30.4 per cent. The observed shortfall implies lower statutory allocations to the three tiers of government. Consequently, after statutory deductions and transfers, a net balance of N620.52 billion was shared among the three-tiers of government.”

The report pointed out that the relatively low inflows into the federation account had serious implications for fiscal sustainability at the sub-national levels due to the latter’s dependence on federal allocations.

Although allocations to states and local governments in April 2020, exceeded their levels in March and the corresponding period in 2019, they remained significantly below the 2020 benchmarks by 42.4 and 34.7 per cent, respectively, it stated.

“The expectation is for states to revise their budgets, in light of the current revenue challenges, to ensure their sustainability. The dynamics in the federation account in April were driven by changes in the oil and non-oil revenue components, both of which accounted for 57.7 per cent and 42.3 per cent of the total federally collected revenue, respectively,” it added.