The Federal Government of Nigeria generated ₦5.99 trillion in revenue, spent ₦19.50 trillion, and reported a deficit of ₦13.50 trillion, representing 225 percent of the total revenue, as contained in the 2023 Fiscal Accounts Report of the Accountant General of the Federation, BudgIT report. In other words, the government’s spending exceeded its receipts by a factor of three. When all of the government’s expenses are more than all of its income in a given fiscal year, a fiscal deficit occurs. Usually, in order to bridge the deficit, the government must borrow money, which increases the total amount of debt it has.
As per the report, released by BudgIT on its X account, shows that the Federation Account Allocation Committee (FAAC) generates ₦3.80 trillion of the Revenue while the federal government’s portion of independent revenue contributes ₦1.98 trillion. Value added Tax (VAT) amounted to ₦441.87 billion, the FG portion of the Federation Account contributed ₦2.39 trillion, and exchange rate differential was ₦715.75 billion. As the government revenues rise, a large portion of those gains are consumed by paying off debt, leaving the government with very little funds to meet its financial obligations.
Non-debt spending accounted for 27.8% of total spending.
It was also revealed that the amount of money spent by the government on debt service exceeded the amount of revenue generated. The most expensive single item, debt servicing, accounts for 43.9 percent of the budget at ₦8.56 trillion, according to BudgIT. Due to this, the government keeps straying from fiscal prudence and borrows more money than it generates, leaving it with a ₦13.50 trillion deficit. Additionally, the firm reported that non-debt spending accounted for 27.8% of total spending, or ₦5.42 trillion, while capital expenditures accounted for 23%, or ₦4.49 trillion.
Capital expenditures, which encompasses building schools and hospitals and investments in Infrastructure projects, receive a meager ₦4.49 trillion of the total amount spent in 2023. Evidently, more revenue was spent on debt service than any other purpose, exceeding generated revenue. According to data from Trading Economics, public spending on goods and services climbed from ₦1,119,292.91 million in the third quarter of 2023 to ₦1,191,727.50 million in the fourth quarter of the same year.
Tinubu requested additional spending of ₦6.2 trillion
From 2010 to 2023, Government Spending in Nigeria averaged ₦1,079,993.36 million. It peaked in the second quarter of 2020 at ₦2,339,712.81 million and fell to a record low of ₦609,792.40 million in the fourth quarter of 2017. According to a letter read to lawmakers in July 2024, President Bola Ahmed Tinubu requested that the Senate authorize an additional spending of ₦6.2 trillion ($4 billion) to fill in gaps in the current year’s national budget. Infrastructure projects and other objectives would be funded with the fund.
President Tinubu’s proposal is in accordance with the terms of the “Accelerated Stabilization and Advancement Plan” (ASAP), which was designed by the Finance ministry in collaboration with executives from the Private Sector and a few economists. The plan’s objective is to tackle obstacles associated with growth-promoting changes. This came during the period the government was under intense pressure of the greatest Cost Of Living Crisis the nation has seen in a decade and the pressure of labour union to agree on a higher minimum wage. Senators had commenced debating a bill to approve the additional expenditure request right away.
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A one-time windfall tax on banks’ foreign exchange gains was another measure Tinubu tried to implement as part of his administration’s plan to generate revenue for “welfare initiatives, education, healthcare, and capital infrastructure development.” Initially, about ₦28.77 trillion was approved by lawmakers in December of last year, for the first full-year budget under Tinubu. Tinubu had previously stated that borrowing expenses will account for thirty percent of budgetary estimates for 2024. Over the years, Nigeria has had significant deficits as a result of poor Tax Collection and declining oil production, its main export, which has forced the government to take on additional debt.