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Thursday, September 17, 2020 / 10:08 AM / By
FBNQuest Research / Header Image Credit: FBNQuest
The
numbers for non-oil revenue collection for the first two months of the year
proved a false dawn as the impact of the Covid-19 virus has since been brutal.
All categories are running well behind their benchmark for the year, and
in May all (other than FGN independent revenue) produced a smaller take than
the year-earlier period. The GDP out-turn for Q2 2020 was not as bad as most
peer economies: however, we suspect that the informal economy was responsible
for the (relative) outperformance and that the more formal, taxpaying segments
struggled as elsewhere.
The CBN's monthly report shows an aggressive benchmark for VAT of N188bn
per month. This would be 50% higher than the best out-turn to date.
The boost to the exemptions from the tax at the new standard rate and
the rise in the minimum threshold, not forgetting the economic slump, all make
the benchmark hard to fathom.
The take from companies' income tax (CIT) peaks in June through to
September, and we should look out for a positive surprise. At this stage, we
are not hopeful.
These revenue trends tell us that the authorities will have to trim
expenditure, which, given the need to pay current salaries and pensions, means
cuts to the capital items that are the FGN's contribution to transforming the
economy. This, in turn, adds to the pressure on the FGN to secure the
multilateral loans from the World Bank and others that cover the deficit in the
2020 budget.
Federally collected non-oil revenue
(gross; N bn) |
|
Sources:
CBN; FBNQuest Capital Research |
Other revenue shown in the table includes education tax receipts,
contributions to the information technology development fund, and levies on
cement, steel and sugar. In aggregate, they generated a little more than FGN
independent revenue in the 13 months under review.
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