Friday, January 15, 2016 09:15 AM / FBNQuest Research
The administration’s growth targets for 2016-18 are largely based upon a steep increase in public expenditure, which amounts to 35% for the FGN this year according to the budget proposals submitted to the National Assembly. That spending has to be better managed and more productive but the administration also has to achieve its ambitious projections for non-oil revenue collection.
Our chart shows gross monthly collections (before distribution to the three tiers of government) through to October 2015. These total N3.10trn over 12 months, and the proposals forecast N5.72trn for 2016. The increases range from 57% for customs and excise to 99% for companies’ income tax.
The administration pledged not to hike direct taxes. It should be able to boost other revenue considerably now that the Treasury Single Account is in operation. A review of waivers and exemptions should also bear fruit.
Since officially forecast GDP growth of 4.4% in 2016 will not transform collections, much therefore depends on unquantifiable efficiency gains.
We assume that the administration would trim its spending in the event of underperformance on revenue collection rather than allow the FGN deficit to grow beyond the projected N2.22trn.
We are unclear about the accounting treatment of fines (such as that imposed on MTN Nigeria, and now with the courts) and of recoveries of looted monies. Some receipts could be accounted for above the line rather than as deficit financing items.
9. Picture for debt service less healthy – May 14, 2015