By Chinwendu Obienyi
Amid the Federal Government’s underwhelming national budget and dwindling revenue and expenditure, some members of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) are concerned about the country’s economic outlook in the near future and have called for urgent coordination of monetary and fiscal policies.
According to the personal statements of the members obtained from the apex bank’s website, the country’s budget fell by 18 per cent to N3.68 trillion.
Also, the fiscal sector, both the government revenue and expenditure underperformed between January and May 2023. For instance, the government’s retained revenue stood at N1,673.15 billion, lower than the pro-rata target of N1,968.12 billion owing to the underperformance of FAAC receipts and gross independent revenue.
In the same vein, total FGN expenditure as of May 2023, was N4,769.26 billion, and 27.8 per cent lower than the budget estimate of N6,606.02 billion. They noted that the shortfall came mainly from allocation for debt service, interest on Ways and Means, and capital expenditure. “Overall budget deficit reduced by -18.15 per cent in the first five months of 2023. The underperformance of the budget is especially felt in the capital expenditures, thus impacting negatively on economic development.
This has in turn led to fears that the fiscal deficit is expected to decline in the third and fourth quarters of 2023 on the back of recent efforts by the new government to manage expenditures better and also improve oil and non-oil revenues.
According to the members, with expenditure reprioritization and fiscal wisdom at both the federal and State levels, there is an expectation that the government debt ratio may fall at least marginally by the end of 2023.
Speaking, Mike Obadan, a member of the MPC, noted that the economy remains vulnerable to both internal and external shocks without meaningful fiscal buffers to withstand the shocks. Obadan added that against the backdrop of weak fiscal management, monetary policy has been seriously stressed from attempts to accommodate fiscal inadequacies and keep the economy afloat.
He stated that the fiscal deficit of the country is a structural factor that has continued to drive inflation upwards. His words, “In the first five months of 2023, the Federal Government recorded a fiscal deficit of -N3,677.28 billion and this has implications for inflation considering the monetary methods of financing it. The President Bola Ahmed Tinubu government is carrying out tax reforms aimed at boosting revenue generation. The Government has set up a Presidential Committee on Fiscal Policy and Tax Reforms which aims to address the issue of multiple taxes, improved ease of doing business and business growth. The legacy petrol subsidy that has burdened government finances for years has finally been removed from the budget.
However, deeper and broader reform of public expenditure is imperative. The new government needs to beam its searchlight on the structure of public expenditure with a view to eliminating unproductive and wasteful expenditures. This means that the government should carry out meaningful fiscal consolidation to complement the Central Bank’s tight monetary policy stance aimed at reining in the apparently stubborn inflation”.
For his part, Edward Lametek, another MPC member, said, “Ultimately, there can be no better time for effective coordination of monetary and fiscal policies than now. This will minimize surprises and enable economic policy to properly anchor market expectations.