Monday, July 17, 2017 9:00AM / FBNQuest Research
We again offer commentary on non-oil revenue collection because it will prove the litmus test for the FGN’s economic policy agenda and because we have an additional three months’ figures from the CBN. The data show collection of N220bn in May and N1.13trn for the first five months of the year.
In both cases revenue generation is well short of what the CBN terms the 2017 monthly budget of N445bn. When we add the said monthly oil revenue target of N450bn, we arrive at a full-year projection of N10.74trn for federally collectible receipts.
These are not to be confused with FGN revenue collection, which the 2017 proposals from the budget and national planning ministry set at N4.94trn (N1.99trn from oil and N2.95trn from non-oil).
We do have a concern or two about the CBN’s monthly budget figure for non-oil collection because it includes N150bn for VAT. Both official briefings and our conversations point to a determination not to raise the standard 5% rate for the tax with the possible exception of luxury goods (Good Morning Nigeria, 12 July 2017). Monthly collection of the tax is running at +/-N80bn.
We should wait to see the size of the seasonal boost to companies’ income tax in July and August. At this point, however, the omens are not good and the likely loser will be the FBN’s ambitious plans for capital spending this year.
A Fitch Ratings expressed similar opinions in its full report dated March 2017. Its projections show general government revenue (ie all three tiers) growing slowly from its estimate of 5.1% of GDP last year to just 7.9% in 2018.
The ratio for 2016 compares with 19.2% for Kenya (also rated B+) and 23.4% for Angola (B). Fitch’s commentary stresses the “struggle in increasing VAT and corporate tax compliance”.
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