The Federal Government recorded a fiscal deficit of N1.39trillion in its operations, between January and March, figures released by the Central Bank of Nigeria have revealed.
The N1.39trn is contained in the personal statement of a member of the CBN Monetary Policy Committee, Obadan Idiahi, which was obtained from the apex bank on Friday.
A government experiences a fiscal deficit when it spends more money than it takes in from taxes and other revenues, excluding debt over a particular period of time.
Idiahi said the negative economic impact of the coronavirus pandemic had manifested in very serious challenges for the Nigerian economy, as major
macroeconomic aggregates had deteriorated.
According to him, the economy is now on the verge of stagflation.
Against the backdrop of significant revenue underperformance and the weakening of revenue-generating capacity induced by the COVID-19 pandemic, the MPC member said the need to contain the pandemic and save livelihoods had constrained the adjustment that would have been necessary under the situation of revenue shortage.
Consequently, Idiahi said fiscal deficits had increased with implications for increased domestic and external borrowing as well as public debt build-up.
He said, “As at March 2020, the Federal Government’s fiscal deficit stood at N1.39tn. With domestic borrowing through bonds at N560bn as financing, the net overall unfinanced deficit stood at N832.96bn.
“In the recently revised 2020 budget, occasioned by the crude oil price crash, the fiscal deficit stands at N4.97tn.”
He said with the new borrowings under the Covid-19 environment, total public debt would further increase beyond the N27.4tn recorded as at December 30, 2019.
He added that while the fiscal authority was doing its best to stimulate the economy, it was currently being constrained with various economic shocks since 2015.
On what could be done to reposition the economy, he said, “Going forward, two lessons must be learnt in relation to good economic management. The first is the need to take diversification of the economy very seriously and the second is the imperativeness of building fiscal buffers.
“An economy that is diversified in the spheres of production, domestic revenue generation and export earnings is better equipped to withstand internal and external shocks, for example, the implications of the coronavirus pandemic.
“Otherwise, shocks create panic in economic management, necessitating painful adjustment measures.”
According to the MPC member, most of the interventions of the Central Bank of Nigeria in the real sectors of the economy are aimed at diversification and self-sufficiency as well as conservation of scarce foreign exchange.
He stressed that a successful diversification strategy would require the country to strengthen its capacity to produce more sophisticated, higher-value goods.
