Far from Great Fiscal Expectations


Wednesday, May 20, 2020 / 10:03 AM / by FBNQuest Research / Header Image Credit: FBNQuest   


We can add a little colour to the FGN's fiscal thinking from local media coverage of a meeting held this month by the federal finance minister with civic society. The meeting predated the amended 2020 budget sent to the National Assembly (Good Morning Nigeria, 15 May 2020) but nonetheless provided some welcome details. We can see how severely the macro landscape has deteriorated since the initial budget was submitted in December: it emerged at the meeting that the FGN expected to receive just N2.4trn this year from the Federation Account Allocation Committee (FAAC), compared with the earlier N4.8trn.

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In some respects, the projections cited in the local media still look overly hopeful. For example, we do not see the accumulation of N2.0trn in the VAT Pool over 12 months for distribution. We see at very best N1.6trn.


In the projections for oil and gas inflows into the federation account, we note that the allowable deduction by the NNPC for under-recovery on premium motor spirit (PMS) has been reduced from N460bn (in the December version) to zero. This would appear to be a coded reference to subsidy removal. 


At the meeting the oil price assumption was US$20/b (since lifted to US$25/b). It was also said that the average production cost of Nigerian crude had been trimmed by US$5/b to US$28/b and that there were clear implications for receipts from petroleum profit tax. We take this to mean higher receipts as a result of lower allowances.


Total FGN revenue, 9M 2019 (percentage shares)

Total N2.94trn

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Sources: Budget office of the federation; FBNQuest Capital Research


It was said that the president would review the land border closure after the virus emergency, and that talks with Nigeria's neighbours had been positive.


In terms of deficit financing, the ministry saw N130bn from privatization (N250bn previously) and N390bn from tied project loans (N330bn).

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