The Federal Government's budget deficit has escalated to 7.5% of Nigeria's Gross Domestic Product (GDP) as of August 2024, highlighting a widening gap between government revenue and expenditure.

This alarming figure was revealed by Muhammad Abdullahi, a member of the Central Bank of Nigeria's (CBN) Monetary Policy Committee (MPC), during the committee's recent meeting.

According to the CBN's economic report, Nigeria's fiscal deficit surged to ₦4.53 trillion in the second quarter of 2024, up from ₦3.88 trillion in the previous quarter.

A fiscal deficit occurs when a government's spending surpasses its revenue from taxes and other sources, indicating that the government is spending more than it earns.

To bridge this financial gap, the government frequently resorts to borrowing, which raises public debt levels. Abdullahi emphasized that this trend underscores the persistent challenges the government faces in improving its revenue generation capabilities.

He noted that an increased reliance on borrowing to fund rising expenditures could jeopardize long-term fiscal sustainability and impact national debt levels negatively.

In his statement, Abdullahi remarked, “The Federal Government’s fiscal operations resulted in a budget deficit of 7.6% of GDP as of August 2024.”

He stressed the need for proactive monetary policy measures to mitigate the potential consequences of this deficit, particularly with the implementation of new minimum wage payments on the horizon.

He also expressed optimism that ongoing efforts to enhance revenue generation and curtail government spending could lead to a narrowing of the fiscal deficit, which would positively affect overall macroeconomic stability.

Additional insights from Aloysius Ordu, a Senior Fellow at the Brookings Institution and fellow MPC member, revealed that federal government revenues fell short, achieving only 37.9% of targets in the first half of 2024 due to deficits in Federal Account Allocation Committee (FAAC) receipts.