Falling revenue shoots up budget deficit 128%
By Jeph Ajobaju, Chief Copy Editor
Federal revenue fell far below estimates and stoked budget deficit to N3.55 trillion in the first quarter ended March (Q1 2022), according figures just released by the Budget Office.
The amount is 128.5 per cent (about N2 trillion) rise beyond projected deficit for Q1 2022, which the Budget Office attributed to pressures on finances, oil sector failures, subsidy costs, and the war between Russia and Ukraine.
Quarterly fiscal deficit in the 2022 Fiscal Framework is estimated at N1.55 trillion, expected to be financed through earnings from privatisation proceeds as well as foreign and domestic borrowings.
However, only N950 billion was financed through domestic borrowing, mainly by Federal Government Bond. It resulted in a N2.6 trillion net deficit financing in Q1 2022.
‘‘Based on the amended Budget Framework, the sum of N8.24 trillion was projected to fund the Federal Budget in 2022, indicating a quarterly share of N2.1 trillion,” the Budge Office explained in the report.
“A total of N969.54 billion was received in the first quarter of 2022. This amount was N1.1 trillion (52.94 percent) lower than the quarterly projection of N2.1 trillion.
“It was also N121.88 billion (11.17 percent) below the N1.1 trillion recorded in the first quarter of 2021.
‘‘The sum of N167.64 billion that was received from oil sources in the first quarter of 2022 was lower than the quarterly estimate of N547.59 billion by N379.95 billion (69.39 percent).
“Similarly, FGN’s share of Dividend of N46.85 billion, Company Income Tax of N159.86 billion, Value Added Tax of N74.35 billion, Customs of N168.16 billion, Independent Revenue of N235.18 billion, Draw Down from Special Levies Accounts of N32.14 billion and Education Tax of N10.64 billion were all below their corresponding quarterly estimates of N48.93 billion, N227.33 billion, N79.17 billion, N208.53 billion, N654.05 billion, N75.0 billion and N76.50 billion by N2.08 billion (4.25 percent), N67.48 billion (29.68 percent), N4.82 billion (6.08 percent), N40.37 billion (19.36 percent), N418.87 billion (64.04 percent), N42.86 billion (57.15 percent) and N65.86 billion (86.09 percent) respectively.
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Distributive revenue
‘‘On the other hand, Signature Bonus/Renewals of N70.21 billion was equal to its quarterly estimate while no inflow was recorded under FGN’s share of Solid Minerals & Mining, Federation Account Levies, Electronic money Transfer Levy, Oil Price Royalty, Domestic Recoveries and Grants & Donor Funding in the quarter under review,” the report added, per Vanguard reporting.
‘‘The net distributable revenue of the Federation stood at N1.21 trillion in the first quarter of 2022. This signified a shortfall of N1.5 trillion (55.05 percent) from the N2.7 trillion projected for the period.
‘‘This was driven largely by the significant reduction in the inflow into the Federation Account from the oil sector.
‘‘The non-oil revenue accruing to the Federation account also decreased by N316.87 billion (31.90 percent) adding to the oil sector shortfall of N785.14 billion (69.54 percent) during the review period.
“Oil Revenue, VAT, CIT, and Customs & Excise Duties contributed 28 percent, 16 percent, 27 percent and 29 percent respectively.
Revenue generation a major constraint
‘‘Revenue generation remains the major fiscal constraint of the Federal Government. The systemic resource mobilization problem has been compounded by recent economic recessions.
‘‘Several measures are being implemented under the administration’s Strategic Revenue Growth Initiatives to improve government revenue while efforts to entrench fiscal prudence is being prioritized with emphasis on achieving value for money.
‘‘The target over the medium term is to grow the Revenue-to-GDP [Gross Domestic Product] ratio from about 7.0 percent currently to 15 percent by 2025. At that level of revenues, the Debt Service-to-Revenue ratio will cease to be worrying.
‘‘Put simply, we do not have a debt sustainability problem, but a revenue challenge which we are determined to tackle to ensure our debts remain sustainable.”