24, 2020 / 09:36 AM / by FBNQuest Research / Header Image Credit: BBC
We saw the expected small quarterly increase in federal revenue collection in Q3 2020 as the country moved from selective lockdown to an easing of most restrictions. Gross receipts (ie federation account monies before distribution to the three tiers) rose by 4.5% q/q, and for non-oil revenue the increase amounted to 46.2% on the same basis. The total of NGN2.27trn in Q3 was 10.6% short of the quarterly benchmark of NGN2.54trn, which is based upon the twice-amended and approved 2020 budget.
The CBN commentary notes the negative impact of OPEC quota restraint on revenue. Nigeria's quota in Q3 and through to the end of the year was 1.41mbpd, which, officialdom has reassured us, it has honoured. This would help to explain the 25.0% reduction in gross oil collection from the previous quarter (although we note that the crude price moved in Nigeria's favour in Q3.)
Companies' income tax of NGN586bn in the quarter surpassed the benchmark of NGN450bn because collections from this source traditionally peak in the third quarter. However, it fell by 10.0% y/y, reflecting Nigeria's most recent descent into technical recession.
Collection from both customs and excise, and VAT were well below the benchmark. Yet there was a welcome rise of 29.2% q/q in VAT as Nigerians were increasingly able to get out of their houses and spend on goods and services. The increase reached 41.5% y/y, reflecting both the hike in the standard rate with effect from 01 February and continuing efforts to improve coverage.
We hark back to this administration's trend of highly ambitious targets for revenue collection. It dates back to the first Buhari budget in 2016.
The National Assembly has played its part in this fiscally expansive stance, having recently passed a NGN13.59trn appropriation bill for 2021 after adding expenditure of NGN500bn to the total in the proposals submitted by the FGN. We do not have access to any more detail but suspect that the trend of aggressive targets will be maintained.
This CBN data series is regularly revised, and sometimes by a wide margin. More detailed (and solid) data are provided by the Budget Office of the Federation and the Office of the Accountant-General of the Federation but with a time lag (its latest report covering H1).
Federally collected revenue (gross; NGN bn)
Sources: CBN; FBNQuest Capital Research