Johnson Chukwu, CEO of Cowry Asset Management Limited, has asserted that increasing crude oil production and enhancing the tax collection system could significantly improve the federal government’s revenue streams.
Chukwu’s remarks follow the Central Bank of Nigeria’s (CBN) monthly economic report, which highlighted a widening fiscal deficit for the Federal Government.
The deficit expanded to N824.8 billion in April 2024, up from N823.9 billion the previous month, marking a 0.11% month-on-month increase.
This places the deficit nearly N60 billion above the budgeted figure.
The report attributes the deficit’s expansion primarily to a decline in government revenue from oil receipts and a concurrent increase in expenditure.
Provisional data indicates that the Federal Government’s retained revenue stood at N419.91 billion in April, a decrease of 0.55% compared to March 2024, and a significant shortfall of 74.29% below the monthly benchmark.
On the expenditure side, total outlay reached N1.24 trillion, which, although 0.12% lower than the previous month, was still 48.10% below the projected spending of N2.39 trillion.
Chukwu noted that the reduction in expenditure was mainly due to a decrease in capital outlays during the review period.
A closer look at the spending reveals that recurrent expenditure accounted for 84.5% of total spending, while capital expenditure made up 6.3%, and transfer payments constituted 9.2%.
The 2024 approved budget is based on a total expenditure of N28.78 trillion and a revenue projection of N19.60 trillion, sourced from both oil and non-oil revenues.
This budget includes provisions for Debt Service and Sinking Fund payments of N8.27 trillion, Recurrent (Non-Debt) Expenditure of N8.77 trillion, and Capital Expenditure of N10 trillion, excluding the recently passed supplementary budget.
Currently, the fiscal deficit stands at N9.18 trillion, representing approximately 50% of the Federal Government’s expected revenue and 3.88% of the projected Gross Domestic Product (GDP).
According to CBN data from Q1 2024, the Federal Government’s fiscal deficit reduced to N2.8 trillion, down from N3.3 trillion in Q4 2023 and N4.0 trillion in Q1 2023.
This reduction is credited to a combination of improved revenue performance and decreased government spending during the quarter.
The CBN’s quarterly report for the first three months of 2024 shows that the Federal Government’s retained revenue increased by 5% quarter-on-quarter and by 34% year-on-year, reaching approximately N1.8 trillion in Q1 2024.
This is the highest revenue the Federal Government has received since Q3 2023, bolstered by improved oil receipts and exchange rate gains due to the depreciation of the Naira.
Chukwu emphasized that the persistent fiscal deficit results from weak revenue collection and rising expenditures.
He stated, “Given this scenario, we believe that the government can enhance its revenue performance through increased crude oil production, a more efficient tax revenue system, and by mobilizing the public to capture more individuals and corporations within the nation’s tax net.”
Chukwu also highlighted the potential positive impact of the government’s plan to tax 70% of banks’ windfall profits from 2023, which resulted from foreign exchange revaluation.
“This measure could potentially strengthen the Federal Government’s revenues significantly,” he added.
