December 19, 2023/FBNQuest Research
According to the CBN’s most recent monthly economic report, the nation’s gross federally collected revenue for distribution to the three tiers of government increased modestly by 2% m/m to almost NGN1.7trn Aug ’23. However, on a y/y basis, the gross federally collected revenue was up substantially, by 29% y/y, thanks mainly to a significant rise in non-oil revenue. Despite the increase in revenue collection on a m/m and y//y basis, the total collections still fell slightly short of (-4%) the pro-rata budget benchmark of NGN1.8trn. After deductions, transfers, and additional revenue from other sources, mainly from excess non-oil sources, the balance distributed to the three tiers of government amounted to NGN966bn compared with NGN908bn in Jul ’23.
Regarding the components of revenue, oil revenue rose 27% m/m to NGN314bn, driven by base effects, higher collections from sharing contracts (PSC), and the 2023 interim dividend payments by NNPC Ltd.
However, despite the m/m increase, the total revenue from oil was still below the monthly target of NGN804bn set out in the budget.
Conversely, non-oil revenue fell by 3% m/m to nearly NGN1.4trn, mainly because of a 19% m/m reduction in collections from companies’ income tax (CIT). Nevertheless, non-oil revenue surprised positively relative to the pro-rata monthly budget target of NGN961bn.
Regarding the composition of non-oil revenue, revenue from CIT, which decreased by -19% m/m, accounted for the largest share of non-oil revenue at NGN636bn, or 46% of the total.
Value-added-tax (VAT) revenue, the second largest (22%) of the non-oil revenue sources, increased modestly by 2% m/m to NGN299bn.
In contrast, revenue collections from customs and excise duties increased substantially by 60% m/m to NGN200bn.
In terms of other sources of revenue, the FGN’s independent revenue rose by 12% m/m to NGN244b.
On a cumulative basis, the federation’s gross revenue amounted to NGN9.7trn between Jan ’23 and Aug ’23. This is considerably lower than the implied budget benchmark of NGN14.1trn, indicating the fiscal constraints arising from the revenue underperformance.
