Nigeria’s deficit spending surges 28% to N 12.1trn as public debt hits ₦134.3trn

The Federal Government of Nigeria’s deficit spending has increased sharply, rising 28% year-on-year (YoY) to ₦12.1 trillion in the first ten months of 2024, compared to ₦9.8 trillion in the same period in 2023.

This figure, reported in the Central Bank of Nigeria’s (CBN) Monthly Economic Report for October 2024, highlights fiscal pressures as the government overshot its 2024 budget deficit target of ₦9.8 trillion by 31%.

Despite significant revenue growth of 36% YoY, fueled by higher inflows into the Federation Account, expenditure outpaced income, widening the fiscal deficit.

Revenues to the Federation Account rose to ₦20.214 trillion in the first ten months of 2024, up from ₦13.079 trillion in 2023, marking a 54.5% increase. However, rising expenditure, particularly capital spending, exacerbated the fiscal gap.

Monthly deficit spending in October 2024 stood at ₦361.89 billion. Concurrently, expenditures rose to ₦1.83 trillion, driven by increased capital outlays, marking a 28.4% month-on-month (MoM) surge.

Nigeria’s public debt reached a staggering ₦134.297 trillion by June 2024, representing 56.23% of GDP and breaching the national debt-to-GDP threshold of 40%.

However, it remained below the 70% benchmark for market-access countries. Exchange rate depreciation and new borrowings to finance the 2024 budget deficit were cited as primary drivers of the debt increase.

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The Federal Government accounts for 88.67% of the consolidated debt, with state governments holding the balance. Federal domestic debt is dominated by FGN bonds (78.13%), followed by treasury bills (17.64%) and other instruments.

Debt servicing costs rose significantly, climbing 37.95% to ₦3.42 trillion by June 2024, with domestic debt service accounting for ₦1.86 trillion and external debt service at ₦1.56 trillion.

Fiscal policy experts have expressed concern over Nigeria’s rising deficit and debt levels, which threaten long-term economic stability.

Dr. Hassan Ahmed, an economist at Lagos Business School, stated, “While revenue growth is encouraging, the pace of expenditure, especially on recurrent items, is unsustainable. Without aggressive reforms to broaden the tax base and reduce reliance on borrowings, fiscal pressures will persist.”

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Sarah Uche, a policy analyst, added, “The increase in deficit spending underscores the need for structural reforms. Diversifying revenue streams beyond oil and improving public sector efficiency are critical steps Nigeria must take to stabilize its economy.”

The CBN emphasized the urgent need for fiscal reforms, including tax policy overhaul and revenue diversification. These measures, coupled with prudent debt management, are critical for reducing fiscal imbalances.

As Nigeria prepares for 2025, economic analysts warn that failure to address these fiscal challenges could hinder economic growth and derail efforts to achieve long-term financial sustainability. The government’s ability to implement reforms will be crucial in navigating these fiscal headwinds.