Nigeria’s non-oil revenues already below budget, say analysts

Analysts at FBNQuest have raised the alarm that non-oil revenues for the prosecution of the 2017 budget are already running below projection.

Citing Central Bank of Nigeria (CBN) data, which indicate that the N252 billion non-oil revenue flows into the federation account in February
were 49 percent below the projection in the 2017 budget proposals, they said the underperformance of non-oil revenue collection indeed extended through to April.

They contend that if the trend was to continue until year-end, there would be obvious implications for capital spending since recurrent
items, notably salaries cannot easily be cut.

However, they remarked that the dwindling non-oil revenues contrast starkly with flows from oil (N293 billion), which were less than one
percent below the provisional target.

Highlighting on value added tax (VAT), they said it has generated steady revenue in the recession, adding that a doubling of the standard rate of five percent would generate an additional N800 billion if only the ability and willingness to pay did not suffer.

“The FGN is very reluctant to increase the rate other than perhaps for luxury goods. Its preference is to strengthen administration and
compliance, and make better use of IT in collection. This requires MDAs to become more “joined-up” and share data between themselves,” they noted.

The analysts aver that a rise in customs and excise duty would be less sensitive, adding that a rigorous look at exemptions would help. They
equally said lifting of the list of 41 banned import items and its replacement with high import levies has been debated officially.

The FGN has announced a tax amnesty and hopes to raise US$1 billion equivalent this year.

“On the surface the target seems modest, given the weak culture of paying tax. However, amnesties must convey the message that non-payers
will only have the one chance of forgiveness.

“The evidence from Turkey and elsewhere is that receipts fall well short of expectation and that governments then repeat the exercise, with
each amnesty generating less revenue than the last,” they pointed out.

The budget was based on a benchmark crude oil price of $44.5 per barrel, oil production of 2.2 mbpd and an average exchange rate of N305/USD.

Revenue was expected to be N5.08 trillion of which N1.999 trillion will come from oil, while about N1.373 trillion would come from company income tax (CIT), VAT, customs and excise duties and federation account levies. About N807.57 billion is expected from independent revenues, N565.1 billion from recoveries and N210.9 billion from other revenue sources such as mining.