Culled—Proshare
September 2, 2020
by FBNQuest Research
Our preferred data source for the FGN’s fiscal performance is the Budget office of the federation rather than either the Federal Inland Revenue Service (FIRS) or the CBN. The budget office provides the greatest detail of the three on revenue sources although we must all be more patient for the data release. We learn, for example, that the FGN’s share of non-oil revenue increased from N1.13trn to N1.58trn in 2019. The take from both companies’ income tax (CIT) and VAT rose modestly, and the decent overall growth was attributable to the collection of signature bonuses totaling N349bn in H2 2019.
We see from the budget office that revenue other than oil and non-oil taxes yielded N1.17trn last year, equivalent to 28.2% of total inflows, compared with N790bn the previous year. The main elements were the FGN’s balances in special accounts, its independent revenue, and assorted domestic recoveries and fines.
The weakness in the oil price since February and Covid-19 have together crushed the FGN’s fiscal expectations for this year, such that the quarterly target for collection by FIRS was slashed from N2.13trn to N1.27trn (Good Morning Nigeria, 14 August 2020). The service covers the collection of all major revenue streams other than royalties from oil and gas.
FIRS exceeded its reduced target for Q2 but only because the take from petroleum profits tax (PPT) was far ahead of its projections. It hit just 71% of its target for non-oil taxes in the quarter.
Total FGN revenue 2019 (percentage shares)
Sources: Budget office of the federation; FBNQuest Capital Research
As with other jurisdictions, we are seeing the impact of Covid-19 on demand and, therefore, taxes. Collection rates that were already poor have been made worse. We may be seeing a glimmer of hope in the steady rise in gross monthly flows into the VAT Pool from N94bn in April to N132bn in June.
