The Federal Government is spending much more money than it’s bringing in, with its budget deficit reaching 7.5 percent of the country’s total economic output (GDP) as of August 2024.
This information comes from Muhammad Abdullahi, a Central Bank of Nigeria’s Monetary Policy Committee member, who shared these details in a statement published on the central bank’s website.
According to a recent Central Bank economic report, this gap between government spending and income has grown substantially, reaching N4.53 trillion in the second quarter of 2024, up from N3.88 trillion in the previous three months.
When a government spends more than it collects in taxes and other income sources, it creates a fiscal deficit. To make up for this shortfall, governments typically need to borrow money, which increases the country’s debt.
Abdullahi explained that this growing deficit shows the government is still struggling to increase its income. This means the government needs to borrow more money to cover its expenses, which raises worries about whether this approach can continue long-term and how it might affect the country’s overall debt.
The situation is particularly concerning as the government prepares to start paying new, higher minimum wages. As Abdullahi stated: “The Federal Government’s fiscal operations resulted in a budget deficit of 7.6 per cent of GDP as of August 2024. Monetary policy must thus remain proactive in dampening the likely consequences of the deficit especially when the implementation of the new minimum wage gains traction.”
However, there’s some hope for improvement. Abdullahi noted: “The deficit could, however, narrow as ongoing efforts to enhance revenue generation and reduce government expenditure are expected to improve the fiscal outlook. The narrowing of the fiscal deficit will have positive implications for overall macroeconomic stability.”
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