A COVID-Driven Sharp Fall in FGN Revenue


Thursday, September 17, 2020 / 10:08 AM / By FBNQuest Research / Header Image Credit: FBNQuest


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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)

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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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