According to a recent estimate, the Federal Government’s budget deficit reached N3.68 trillion in the first five months of 2023. According to a report provided by the Central Bank of Nigeria on the Monetary Policy Committee’s personal notes, the committee was concerned by growing low revenue in the face of a huge budget deficit.
According to the article, Mike Obadan, a member of the Monetary Policy Committee, stated that the government needs to alter its spending in order to confront the massive budget deficit.
Obadan, “The fiscal deficit of the country is a structural factor that has continued to drive inflation upwards. In the first five months of 2023, the Federal Government recorded a fiscal deficit of -N3.7tn and this has implications for inflation considering the monetary methods of financing it.”
He added, “However, deeper and broader reform of public expenditure is imperative. The new government needs to beam its searchlight on the structure of public expenditure with a view to eliminating unproductive and wasteful expenditures.
“This means that the government should carry out meaningful fiscal consolidation to complement the Central Bank’s tight monetary policy stance aimed at reining in the apparently stubborn inflation.”
According to the economic report for Q1, 2023 released by the CBN, in first quarter of 2023, “A decomposition of FGN spending showed that recurrent expenditure, capital expenditure, and transfers accounted for 84.6, 9.8 and 5.6 per cent, respectively.”
An MPC member, Omamegbe, Mo’, stated that, “The combination of declining revenues and increasing expenditures has led to a growing fiscal deficit, necessitating borrowing and potentially fuelling inflationary pressures.
“The underperformance of the oil sector, coupled with unsustainable fuel subsidies, further exacerbates the fiscal issues.”
