Proposed 2018 non-oil revenue of N4.164trn likely unattainable
Total proposed non-oil revenue for the 2018 budget stated to be about N4.164 trillion is likely unattainable based on existing trends, which might lead to an increase in the 2018 budget deficit of N2.005 trillion, BusinessDay analysis show.
The revenue projection for the year stated to be N6.607tn includes oil revenue of N2.442tn, contributing about 37 percent to the total proposed revenue and non-oil contributing a larger share of 63 percent.
An analysis of non-oil revenue proposed between 2015 up to the third quarter of 2017 revealed that the government has not been able to achieve its targeted non-oil revenue there by leading to an increase in government borrowings in order to ease its budget deficit. Despite the non-oil sector accounting for a larger portion of the economic activities at about 90 percent of GDP, the government has however failed to translate this enormous percentage into actual revenue, although it could be as a result of the informal sector dominating the non-oil sector which the government hasn’t been fully able to exploit or tax.
“The bulk of non-oil revenue is from corporate taxes. Why it hasn’t been met is as a result of the country’s weak tax base therefore lot of companies still need to be introduced into the tax bracket,” said Dolapo Ashiru, CEO Mega Capital Financial Services Ltd.
Ashiru added “Also, in 2016 and 2017 a lot of companies recorded low profit due to economic downturn in the period.”
Non-oil revenue includes company income tax (CIT), value added tax (VAT), custom and excise duties, independently generated revenue (IGR), tax amnesty, recoveries, proceeds from restructuring government’s equity in oil joint ventures and other sundry incomes.
According to analysis from BusinessDay, a larger part of the revenue is expected to be gotten from IGR, CIT, proceeds from restructuring oil JV and sundry income collectively contributing a total 72.66 percent amounting to a value of N3.02trn, while recoveries, custom and excise duties, VAT and tax amnesty contribute about 27.2 percent amounting to N1.13trn. In 2015, government budgeted revenue from IGR to be about N489.3bn but an actual of 66 percent of the budgeted or N323.4bn was realised. In 2016 with the introduction of treasury single account (TSA) N1.5trn was budgeted but actual derived revenue was N237.8bn while in 2017, N808bn was budgeted and as at the third quarter of the year, about N155bn has been derived. According to an analyst who spoke anonymously to BusinessDay, “Looking at the trend, it can be noticed that the budgeted revenue to be generated from federal government IGR is unrealistic. In 2017, as of September revenue collection was 14 percent below target as a result of non-oil revenue which was mainly driven by IGR. So, it forming the largest part of the non-oil revenue we might also see a shortfall.” Revenue from CIT is projected to be about N794.7bn, contributing about 19 percent to the total non-oil revenue. The average budgeted revenue projected from 2015 to 2017 is about N775.57bn while the average actual up to the third quarter of 2017 is about N445.77bn. Expected revenue from VAT estimated to N207.9 contributing about 5 percent to total expected revenue is lower by about 14 percent from the value projected in 2017 which was N242bn. Average budgeted expected revenue from 2015-2017 is N204.23bn while the average actual revenue recovered from VAT from 2015 to the third quarter of 2017 is N102.67bn. Budgeted revenue from custom and excise duties from 2018 is estimated to be N324.9bn, a 16.9 percent increases from the figure projected in 2017 which was N278bn. The calculated average amount budgeted from 2015 to 2017 is N309.4 while the actual realised between the period up to the third quarter of 2017 is N222.5. According to Olufemi Awoyemi, CEO, proshare “With Nigeria customs declaring N1trn in 2017, being the fact the country was in recession in the first quarter of 2017. It is possible they can earn the same in 2018 as the country is currently out of recession.” The FGN also plans to restructure its holdings in oil joint ventures to raise N710bn, by selling down some of its stake in them and move them incorporated joint ventures to incorporated companies with separate governance framework, separate board of directors and separate management structure representing the interest of each shareholder. Other expected revenue as stated in the proposed 2018 budget, will be from FGN Share of Tax Amnesty Income of N87.8bn, and various recoveries of N512bn, other sundry incomes of N678.4bn. Some analyst however believe that 2018 will turn out much better than the periods discussed, considering the fact that economy is slowly expanding after exiting recession and it is expected that by next year all aspect of the economy will feel the impact. Ashiru concluded “it is expected that the macro economy of the country will improve and the government will likely be able to recoup a larger part of its expected revenue in the year.”
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