Thursday, May 12, 2016 10:39 AM / FBNQuest Research
In our chart today we show gross monthly collections of non-oil revenue (before distribution to the three tiers) through to January. They total N3.12trn (US$15.8bn) over 12 months.
The take of N196bn in January compares with a pro rata monthly average of N477bn per the 2016 budget. This underperformance would point to some risks to the FGN’s expansionary fiscal stance: its N1.8trn capital expenditure is based upon its aggressive target for non-oil revenue collection.
We therefore highlight a hypothetical choice between cutting the capital spending and allowing the deficit to increase. The choice remains hypothetical on the basis of one month’s outturn.
Collection should pick up now that the 2016 budget has finally been approved. We should also allow for the fact that the treasury single account (TSA) was barely operational in January.
Customs and excise is the weakest of the four components of gross non-oil revenue. The contribution of N50bn in January compares with a pro rata average of N72bn in the budget.
The customs service has pointed to CBN policies as the reasons for the shortfall. It presumably had the famous circular on the 41 import items in mind. Ultimately, the shortfall is the indirect consequence of the slide in the oil price.
We should wait for several months’ data to judge the success of the FGN’s several initiatives, including: the TSA, scrutiny of waivers and exemptions, collection of stamp duty (subject to a legal challenge), efficiency gains, possible revision of the standard VAT rate and regulatory fines.