Tuesday, September 21,
2021 / 09:50 AM / by FBNQuest Research / Header Image Credit: FBNQuest
The CBN's monthly report for April '21 shows improvements in the federation's gross revenue, thanks to a gradual return of economic activities to pre COVID-19 levels. Gross revenue increased 21% y/y to NGN 1.1trn, and was c.8% higher than the pro-rata monthly budget. The revenue performance was driven by growth in non-oil revenue which advanced 87% y/y to almost NGN713bn, and outperformed the benchmark by c.37%. The performance is encouraging considering that non-oil revenue underperformed the benchmark in March '21 by c.11%.
A substantial amount of non-oil revenue outperformance was attributed to companies' income tax (CIT), which climbed by 74% y/y due in large part to seasonality in tax remittance. Another positive component was VAT revenue, which was up 51% y/y following a 250bp y/y rise in the standard rate to 7.5% in February of last year.
We believe that an additional factor was increased personal consumption as firms resumed normal operations. Supporting our thesis is GDP data which shows that the trade and manufacturing sectors expanded by c.22.5% and 3.5% y/y respectively in Q2 '1.
In contrast, oil revenue continues to disappoint. It was down c.-26% y/y to NGN393bn in August and was c.22% below the pro-rata benchmark. Notably, petroleum profit tax and royalties, and domestic crude oil and gas sales fell -15% y/y and -41% y/y respectively.
Total proceeds from crude oil and gas exports were a paltry c.NGN4bn, compared with c.NGN35bn in April '20, and a monthly budget of c.NGN53bn, owing largely to "under-recoveries", or subsidies on gasoline incurred by the Nigerian National Petroleum Corporation. Other oil revenue came in at c.NGN16bn in April '21 compared with a benchmark of NGN96bn.
The minister of finance assessed the monthly subsidy bill at c.NGN150bn (USD363m), or an unsustainable yearly sum of c.NGN1.8trn. In FY '20, gross federally collected revenue stood at a meagre c.6.0% of GDP. Given the state of government's fiscal position, eliminating fuel subsidies would be a prudent move towards relieving the economic burden.
Recently a lot of furore was generated over the clamour by Rivers and Lagos State governments to take charge of VAT collection in their respective states rather than having it handled by the Federal Inland Revenue Service. The debate has shifted to the Supreme Court. This is a development that will be closely watched as the outcome could have major ramifications.
Sources: CBN; FBNQuest Capital Research