Tuesday, September 28,2021 / 11:11 AM / by FBNQuest Research / Header Image Credit: FBNQuest

Wesee from the latest monthly Economic Report from the CBN that the overallfiscal deficit shrunk to NGN150bn in April '21. Although a cursory glance atthe data might indicate an improvement over the deficit of NGN1.0trn recordedin the preceding month, the marked improvement is mostly explained by delays inthe budgeted releases to government, ministries and agencies. Aggregate FGNexpenditure plunged to NGN560bn from NGN1.38trn in the prior month and wasabout 51% behind the monthly benchmark. The monthly expenditure of the FGNfluctuates from month to month, as shown in the chart below. Nonetheless, theFGN's aggregate spending from January to April, at c.NGN3.4trn, closelyreflects the expected budget run-rate implied by the forecast expenditure ofNGN13.6trn for FY '21f.

Thedecrease in April, like February, implies we should expect spending to risesubstantially in the months ahead. Also, given the passage of the supplementarybudget, which takes the total FY '21 expenditure to NGN14.6trn, the benchmarkwill be revised upwards in the coming months.

Recurrentexpenditure which fell to NGN262bn, the lowest since January '16, reflects asharp drop in personnel costs to a paltry NGN28bn, far short of the pro-ratabenchmark of NGN281bn.

Capitalspending, on the other hand, fared better, coming in at NGN282bn, barely c.18%below the benchmark. The total capital outlay of NGN1.4trn between January andApril of this year is a better outcome than the NGN934bn invested during thecomparable period of FY '20.

Wehave become accustomed to the FGN's optimistic revenue projections, and as suchare not surprised that the FGN's retained revenue came in at c.NGN409bn inApril, falling short of the pro-rata run-rate of NGN666bn implied by thebudget. That said, retained revenue improved by 15% m/m, thanks to increases inrevenue from the federation account, the VAT pool, and independent revenue ofthe FGN.

Thefiscal deficit for FY '21 is projected to be 4.5%. However, given the lowrevenue performance so far this year, along with high spending, we expect thedeficit to hover at c.5.%.

Wenote that the series' data is susceptible to periodic adjustments; therefore,our analysis is based on broad trends.

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