Friday, June 05, 2015 8:56AM / FBN Capital Research
We can trace the steep decline in monthly distributions by the Federation Account Allocation Committee (FAAC) to the slide the oil price (Good Morning Nigeria, 19 May 2015). We naturally follow the same path when we track the performance of the federal revenue collection agencies.
The data from FIRS show that its annual take has risen by a factor of ten since 2000. Yet total gross non-oil collection amounted to just 3.7% of rebased GDP in 2013 and 3.8% last year.
The FIRS has achieved its revenue targets every year this century other than 2006 (see chart), when the FGN appears to have set an outlandish objective.
Q4 2014 brought a small underperformance of just N17bn. This deepened in Q1 2015 when FIRS collection of N757bn fell far short of the target of N1.02trn, which was carried forward from the previous year in the absence at the time of an approved budget.
Revenue from the petroleum profits tax slumped to N369bn in Q1 2015 from N638bn one year earlier. We also notice a small decline over the same period to N388bn from N418bn in non-oil revenue collection by the FIRS. This squares with accounts of squeezed household budgets.
The last administration proposed a set of welcome luxury taxes which would have made a small impact. The more substantial challenge is to transform compliance, reduce waivers and exemptions, and plug the many leakages. A doubling of the standard 5% VAT rate would generate up to N600bn annually.
The FIRS is the largest but not the only revenue collection agency. It collected N2.26trn of gross federally collectible non-oil revenue of N3.40trn in 2014.
1. Further decline in FAAC distributions -190515
2. Picture for debt service less healthy – 140515
3. A modest decline in reserves – 070515
4. A further sharp decline in reserves - 050515