Tuesday, July 26, 2016 9:57am/ FBNQuest Research
The local media has reported a presentation in Abuja yesterday by the federal budget and national planning minister, Udo Udoma, on the 2017-19 Medium-Term Expenditure Framework.
The document makes conservative assumptions for the average oil price, rising from US$38.0/b this year to US$42.5/b in 2017 and US$50.0/b in 2019. Its projections for output have 2.20 mbpd for next year, increasing to 2.40 mbpd in 2019. The assumption is that security is quickly restored to the delta.
The minister sees further advances in non-oil revenue collection. This echoes the recent positive comments by the chair of the Federal Inland Revenue Service (Good Morning Nigeria, 21 July 2016).
Udoma mentioned a 42% increase in VAT receipts in 2017. It is unclear whether this is based on a higher compliance rate and/or a hike in the standard 5% levy, as advocated by the IMF. We suspect the former.
Our chart shows that both oil and non-oil collection in 2015 underperformed in relation to the budget. A similar pattern is likely this year although we expect a pick-up on the non-oil side in H2 2016.
We welcome the early start to the process. The minister mentioned that he aimed to submit the 2017 budget to the National Assembly by October. If, as the FGN has suggested, this year’s extended process did iron out what we might call procedural issues with the assembly, then we could have the earliest approval of the budget for many years.