Thursday, December 11, 2014 18:32 PM / FBN Capital Research
On Wednesday, we noted that some measures in the CME’s package of fiscal compression would yield benefits over time. These are mostly steps to enhance non-oil revenue collection - Practical limits to fiscal surgery
The shortfall in cumulative monthly FAAC distributions to the three tiers of government in 2015, relative to the ytd data for the current year, has been estimated at up to N1.3trn on an average oil price of US$70/b.
This offers a rough framework for a review of the FGN’s plans on the non-oil revenue side if it is not to borrow heavily or allow the deficit to creep up towards the 3% of GDP threshold set in the fiscal responsibility legislation.
The CME said that a review of incentives, a plugging of custom loopholes and a surcharge on luxury goods would together raise N480bn over three years.
Another initiative, for which the CME has obtained the backing of banks’ CEOs, is to force the heads of ministries, departments and agencies (MDAs) to surrender, as legally required, 25% of their gross revenues.
The historic data in the chart show the seasonality in the collection of corporation/income taxes (CIT), which peaked this year in June and July.
Customs and excise remains the underperformer among the agencies, for which the FGN’s own tariff policy (such as on rice) is largely to blame.
The CME has doubled, to N168bn, the additional monies the Federal Inland Revenue Service is expected to collect above its initial 2014 target.
These measures, supplemented by spending cuts, will go some way towards covering the estimated oil revenue shortfall of more than N1trn in 2015.