The CBN’s latest quarterly Economic Report (for Q4 2017) points to the central challenge for the federal finance ministry. FGN expenditure runs far below budget. For 2017, for example, it totaled N4.9trn according to the CBN report rather than the figure in the approved budget of N7.8trn. This very large shortfall is explained by the underperformance on revenue collection. In 2017 “suboptimal” oil production was a factor but the explanation over several years remains the paucity of revenue generation from the non-oil economy.
- The FGN’s retained revenue in Q4 2017 was 87% sourced from the federation account, indicating the need to boost revenue from its independent sources.
- The CBN report shows the FGN’s capital spending at just N147bn in 2017, which we assume to be incomplete data. The Office of the Accountant-General of the Federation has N1.2trn for the year, compared with N600bn in 2016. Ben Akabueze, director-general of the Budget Office, told the media at the recent spring meetings in Washington DC that capital spending would not be affected by the delayed passage of the 2018 budget because of preliminary work by the ministries, departments and agencies on procurement.
Sources: CBN; FBNQuest Capital Research
- The CBN data point to deficits equivalent to 2.2% and 1.9% of GDP in 2016 and 2017. The FGN did not therefore breach the 3.0% ceiling set in the Fiscal Responsibility Act 2007. The multilaterals and ratings agencies favour the broader measure of the general or consolidated government deficit, for which the IMF has 3.9% and 5.5% (preliminary) for the respective years.
- All these sources work with calendar years whereas budget years, as we have noted, run well past end-December. This creates a statistical quagmire.