‘Why Fed Govt Expenditure Fell To N781bn In August’

The Federal Government’s expenditure fell by 18.76 per cent to N781.61bn in August as a result of compression in capital spending relative to their budget.

A member of the Monetary Policy Committee, Prof. Adeola Adenikinju, disclosed this in his presentation at the last MPC meeting which was released by the Central Bank of Nigeria on Wednesday.

He said, “The fiscal sector is significantly challenged. The Federal Government’s retained revenue declined from N420.2bn in July 2021 to N376.33bn in August 2021.

“The corresponding fall in government expenditure from N962.05bn in July 2021 to N781.61bn in August 2021 is due to compression in capital spending relative to their budget.”

Adenikinju noted that the excess crude oil account was further depleted in August to augment government balances.

He stated that there was also mixed performance in the external trade sector.

Balance of trade and current account balances, though in deficits, showed improvement in August 2021, relative to previous month, owing to higher export proceeds and lower imports of non-oil products, he added.

He said, “Similarly, remittances inflow increased. Both FDI and FPI increased month-on-month due to improved yields on fixed income securities.

“However, the exchange rate markets experienced significant pressures leading to depreciation of the naira against the US dollar. The external reserves rose because of increase in the SDR allocation by the IMF and rise in third party receipts.”

Another MPC member, Mike Obadan, stated, “Fiscal operations of the government, by resulting in escalating fiscal deficits, have tended to worsen macroeconomic instability. As at June 2021, the Federal Government’s fiscal operations resulted in an overall deficit of N4.328tn, 61.8 per cent higher than the budgeted amount.

“The deficit reflects low inflow of government revenues compared to the expansion in government expenditure. As at June 2021, Federal Government revenue was about 35 per cent below the budget benchmark for 2021, financed by money and new borrowings.”