Towards a structural FGN deficit

Proshare

 

Friday, April 22, 2016 9:20AM/ FBNQuest

We see from the CBN’s latest quarterly economic report that the FGN deficit reached N290bn (US$1.47bn) in Q4 2015, making a total for the year of N1.04trn.

Our chart shows fluctuations in FGN retained revenues, which we can trace to the gross flows into the federation account before distribution to the three tiers of government. (These flows broadly mirror movements in the oil price.)

In Q2 2015 the flows amounted to N1.40trn and FGN retained revenues N539bn; in Q4 the comparable figures were N1.60trn and N818bn.

Aggregate expenditure is less fluid, being predominantly recurrent. For obvious reasons, governments like to pay salaries and allowances if at all possible.

The deficit for 2015 was equivalent to 1.1% of GDP, compared with 0.9% the previous year. Both were therefore well within the 3% threshold set in the fiscal responsibility act of 2007.

The FGN has projected a deficit of N2.20trn in this year’s expansionary budget proposals, equivalent of 2.1% of estimated GDP.


 

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We refer to proposals of course because of the depressing impasse between the executive and the legislature over the signing off by the president of the budget approved by the Senate.

We have said for several years that the main hurdle to critical reform in Nigeria is institutional: this to-ing and fro-ing between the two sides of the same political colour reinforces the point.

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