deficit spending
Deficit spending is when a government spends more money than it collects in revenue, and covers the gap by borrowing.
In plain English
It is the last Friday of the month at a civil service office in Awka, and the whisper going round is that salaries will be a week late again, because allocation from Abuja has not cleared.
Somebody jokes that the federal government is like their neighbour who throws a big owambe every December on a salary that cannot cover it, and pays the caterer later with a loan from three different cooperative societies.
That neighbour is not mad, and neither is the government. Deficit spending simply means spending more than you earn in a given year, then borrowing to close the gap, usually through bonds or loans, with a plan, or at least a hope, to pay it back later.
Nigeria does this constantly. The budget passed in Abuja most years has a deficit clearly written into it before a single naira is spent, because oil revenue and taxes rarely cover the ambition of the budget, so the government issues bonds, borrows from the World Bank, or draws down on other facilities.
The United Kingdom does the same thing on a much larger scale. During the 2020 lockdowns, the Treasury spent hundreds of billions of pounds on furlough wages and business support that tax revenue alone could never have funded that year, and borrowing filled the difference.
For a Nigerian in London sending money home, the effect can feel personal. When a government borrows heavily, it can eventually push up inflation or interest rates, which changes how far ₦50,000 stretches for a mother in Enugu compared to five years ago.
Nigeria's 2023 budget was about ₦21.8 trillion, but expected revenue was only around ₦10 trillion, leaving a deficit of roughly ₦11.3 trillion that had to be borrowed to bridge the gap.
Questions people ask
Is deficit spending always a bad sign for an economy?
Not always. If the borrowed money builds roads, power plants, or schools that grow the economy, it can pay for itself over time. It becomes worrying when the borrowing funds recurring expenses like salaries and subsidies with no growth to show for it later.
How does government deficit spending affect ordinary people?
It can show up as inflation, higher interest rates on loans, or a weaker naira, because government borrowing competes with businesses and households for the same pool of money and can push prices up over time.
What is the difference between deficit spending and national debt?
Deficit spending is the yearly gap between what a government spends and what it earns. National debt is the total pile of unpaid borrowing built up from years of deficits added together, plus interest.
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