The finance minister’s public presentation of the approved 2023 budget shows that the FGN’s fiscal operations for the Jan-Nov ’22 period resulted in a fiscal deficit of -NGN6.4trn, ahead of the pro-rata figure of -NGN6.1trn. Despite the large size of the fiscal deficit, the outturn for the period implies an improvement over the broad trend observed over H1 ’22. According to the Q2 budget implementation report, the FGN recorded a fiscal deficit of -NGN5.5trn in H1 ’22 compared with a budgeted figure of -NGN3.1trn. The difference can be explained mainly by the better revenue performance recorded in H2 ’22 (ex-Dec) relative to H1 ’22.

The FGN’s retained revenue (ex- government-owned enterprises) of NGN5.9trn for 11M ’22 implies a higher revenue inflow of almost NGN3.5trn over the Jul-Nov ’22 period, compared with NGN2.4trn for H1 ’22.

The total revenue available to fund the FGN’s budget as of 11M ‘22 amounted to NGN6.5trn, around -13% below the pro-rata benchmark.

Non-oil revenue totalled NGN2.1trn, exceeding the target by 23%. The key drivers were the strong performance delivered by the companies' income tax (CIT) and value-added-tax (VAT) components of revenue which beat their respective targets by 59% and 24%, respectively.

The FGN intends to enhance the growth of non-oil revenue receipts by improving tax administration, collection efficiency, and expanding the tax base.

For instance, one of the key amendments of the 2022 finance bill is the proposed application of capital gains tax on the acquisition and disposal of digital assets.

In contrast, oil revenue underperformed. It brought in a paltry NGN587bn compared with a budgeted revenue projection of NGN1.6trn for the period.

The oil sector’s underperformance due to low production arising from large-scale crude oil theft and production shut-ins has been widely reported by the local and international media.

In contrast to revenue, expenditures generally performed in line with expectations, as the total spending of NGN12.9trn trailed the pro-rata target by just 5%.

Debt service costs are rising. They exceeded the budget benchmark by 76%. A notable line item is the interest cost on ways-and-means advances, which amounted to NGN1.6trn over the period. This is much higher than the NGN1.2trn recorded for the whole of 2021.

Recurrent expenditure and statutory transfers both overshot their pro-rata targets by 23% and 22%, respectively. For the former, the key drivers were personnel costs and overheads for the ministries' departments and agencies, which were running ahead of forecasts.

In contrast, capital expenditure disappointed with a performance of approximately 40% of the budgeted benchmark.

Following the recent passage of a 2022 supplementary budget of NGN819bn, the forecast fiscal deficit for 2022 has been revised upward to NGN8.2trn (4.7% of 2021 GDP) from NGN7.4trn previously. The new 2023 budget forecasts an even higher fiscal deficit of NGN11.3trn.