CSLS raises concern over Nigeria’s rising budget deficit
CSL Stockbrokers Limited, a subsidiary of FCMB Group Plc, has expressed concern over the rise in budget deficit in Nigeria.
President Muhammadu Buhari had on Thursday presented the 2021 budget proposals to the National Assembly.
The budget deficit is projected at N5.20 trillion, with proposed aggregate expenditure of N13.08 trillion and total revenue of N7.89 trillion.
Analysts at CSL Stockbrokers, in a note on Friday, said, “We are concerned with the government’s rising deficit budget.
“While we acknowledge the need to pursue an expansionary fiscal policy under current economic conditions, it comes at the detriment of long term fiscal sustainability.”
According to them, the budget deficit for 2021 sums up to 3.64 percent of GDP which exceeds the Fiscal Responsibility Act’s limit of 3.0 percent.
The analysts said, “We note that the federal government typically exceeds its budgeted deficit for a budget year.
“For example, according to the President, the government already had a budget deficit of N3.27tn at the end of July 2020 which, if annualised, may bring the budget deficit to N5.61tn by the end of 2020 compared with the budgeted N4.95tn except there is better fiscal prudence in the second half of the year.”
They said the overall implication of this “is the impact on the government’s actual debt service to revenue ratio which is becoming unsustainable”.
According to CSLS, the budget is expected to accelerate the economy’s pace of recovery from an imminent recession, promote diversification, enhance competitiveness and ensure social inclusion.
“We are a little pessimistic on the Federal Government’s ability to achieve its revenue target of N7.88tn in 2021 (the highest in the history of Nigeria). This is based on the government’s historical revenue performance and current economic realities,” the analysts added.
They said revenue performance over the past five years (excluding 2020) averaged 58.8 percent, reflecting significant underperformance.
