Thursday, March 26, 2015 9:14 AM / FBN Capital Research
The Budget Office of the Federation compares revenue generation in Nigeria (12% of GDP in 2013) with the level in middle-income African economies and emerging economies generally, which it puts at 22% and 20% respectively. This poor record was highlighted by the publication of the new national accounts, and has since been exposed further by the slide in the oil price.
The figure for 2013 is for gross federation account revenue before any deductions, and can be divided into 8.4% for oil and 3.6% for non-oil. To pursue another angle, we can view this breakdown in the context of the structure of constant price GDP, of which oil and gas supplied just 10.3% of the total in 2014.
We might have expected a still steeper decline for the oil element in the chart. However, while revenue from sales of oil and gas fell as anticipated, the take from the petroleum profits tax (PPT) held up rather better due perhaps to the necessary lag in payments.
In contrast, the trend in non-oil revenue is modestly upwards. Seasonally it peaks in June and July each year due to collection of companies’ income tax.
The star performer is the Federal Inland Revenue Service, which collects PPT and most non-oil taxes, and is working with external consultants (McKinsey). Its own data show that it raised N4.72trn in 2014 vs an original target (subsequently increased more than once) of N4.07trn.
The FGN had a range of plans to raise non-oil tax collection in its2015 budget submission in mid-December and will doubtless have more when it responds to the assembly’s recent harmonized proposals.
1. No alternative to more aggressive tax collection
2. Growth in job creation, a fillip to tax revenue
3. Changing aspirations for Nigeria Inc
4. The IMF broadly supportive of government policy
5.Modest uptick in lending to agric