FG 2015 Non-Oil Revenue Decline 23% | Independent Newspapers Limited
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FG 2015 Non-Oil Revenue Decline 23%

Posted: Mar 2, 2016 at 9:28 am   /   by   /   comments (0)

Steve Omanufeme, Lagos

Gross federally collectible revenues for fiscal 2015 were lower than expected, falling below budgetary projections by 23 percent, according to Central Bank of Nigeria’s (CBN) figures obtained from FBNQuest Research Daily Morning Note.

The gross monthly collections of non-oil revenue (before distribution to the three tiers of government) through to November 2015 at N3.15 trillion were only 77.58% of the projected receipts of N4.06 trillion for the whole year.

The performance for 2015, which only had spikes in March and August was further improved in November as all revenue streams notched up to record an aggregated monthly receipts of 17% ahead of budget, and 78% above the previous month. The positive variation according to FBNQuest Research was achieved due to un-seasonally strong flows of N163 billion from companies’ income tax (CIT) in the month.

Customs and excise remains the poor performer of the four main non-oil revenue streams – value added tax (VAT), companies income tax, and other taxes including withholding tax, stamp duties etc. Customs underperformed, due to a combination of import restrictions, waivers, flaws in governance, and the slowing economy.

“The implications for the economy are grave given the falling prices of oil at the international market,” an analyst told Independent, adding that the development needs to be addressed by broadening and overhauling the nation’s tax base as well as strengthening/monitoring collection agencies like the customs for efficiency.

Though budget targets were marginally unmet in 2015, the Federal Government in its 2016 budget proposal has forecast N5.72 trillion collections. The projections, which are aggressive going by results of last year, are without plans of any tax increases for the period.

Udo Udoma, budget and national planning minister, has been quoted as saying that government is not considering a rise in value added tax (VAT) “at the moment”. A doubling of the 5% VAT rate would generate an additional N800 billion as well as meet Nigeria’s commitment to fellow members of the Economic Community of West African States (ECOWAS).

The minister is also quoted as noting that the revenue projections for 2016 budget were articulated by government in close collaboration with the Federal Inland Revenue Service (FIRS) and other revenue generating agencies.

He disclosed that increased non-oil revenue would be achieved through multi-faceted channels.
The channels included a comprehensive audit, compliance to spending guidelines by government owned enterprises (GOEs) with a view to enhancing independent revenue remittance from N489.29 billion in 2015 to N1.5 trillion in 2016 as well as the full implementation of the Treasury Single Account (TSA) to generate N900 billion operating surplus from the CBN, Nigerian National Petroleum Corporation (NNPC) and the Nigerian Maritime and Safety Agency (NIMASA).

Others include broadening tax base and improving efficiency in tax refined collection expected to raise VAT collection to N1.42 trillion in 2016 from N1.34 trillion in 2015 and funds recovery in the region of N162.43 billion from NPDC. Other avenues to meet the aggressive projections include across-the-board efficiency gains, a close look at existing waivers and exemptions, the setting up of the Treasury Single Account (for FGN independent revenue) and, according to some sources, the collection of stamp duty.

The proposals project receipts of N862 billion this year, fractionally lower than in the 2015 budget. Portfolio investors may be curious why the authorities have not hiked the duty on beer.

During the administration of President Goodluck Jonathan, the government invited McKinsey and Company to diagnose the nation’s tax system. One of McKinsey’s findings was that 65 percent of registered tax payers did not file their returns for two years, 75 percent of registered small and medium scale businesses were not captured in the tax net, and 30 percent of the companies operating under the pioneer status incentive, abused their tax exempt status.

Federally collectible non-oil revenues, 2015
Sources: CBN; FBNQuest Research