Subpar Expenditure, Subpar Revenue Collection

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Friday, October 30, 2020 / 08:55 AM / by FBNQuest Research / Header Image Credit: lgrc.ng

 

Today's chart shows the FGN's spending in the 13 months through to June 2020. In the budget eventually signed off by the president, monthly spending pro rata was N901bn: this was exceeded just twice in the period (September and December 2019). We are not celebrating restraint, rather we are saying that the FGN again had to cut its cloth in line with underperformance on revenue collection. We have often observed that this administration (Buhari One and Two) has adopted an expansionary fiscal stance that rests upon optimistic revenue projections.

                                                                              

It is said that the FGN, unlike many public agencies and state governments, has honoured the latest increase in the national minimum wage. Personnel and pension payments rose by 33% y/y in June.

 

Capital releases per the approved budget average N208bn. This has not been achieved once this year although they tend to pick up in the second half.


Monthly payments are generally lumpy, and therefore complicate planning. The exceptions are transfers, which are predetermined statutory payments to federal bodies such as the National Assembly, the National Judicial Council and the Independent National Electoral Commission. 


In this series, debt service payments are included in other recurrent spending. In H2 2020 we would expect to see the benefit of the crashing of yields on FGN paper in the data.


 

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Over a longer five-year horizon, we find from the CBN's data series that total spending in H1 2020 was 107% higher than in the same period in 2015. The common narrative is that the share of recurrent expenditure in the total has ballooned due to a lack of fiscal discipline: it increased by 113% over the same five years.


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