• Thursday, May 30, 2024
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BusinessDay

Nigeria’s non-oil income outpaces oil by N1.5trn in one year

Nigeria’s non-oil income outpaces oil by N1.5trn in one year

… covers 16 percent of FG’s expenditure

Nigeria’s non-oil revenue surpassed oil revenue in twelve months, marking the third time this has occurred since the oil boom in 1973, according to findings by BusinessDay.

The government earned the bulk of its income from non-oil sources in the twelve months of 2022, marking the second time that non-oil revenue has eclipsed oil revenue since the oil boom in 1973.

Data from the country’s Budget Office showed Nigeria earned N2.38 trillion from non-oil revenue which is higher than N776 billion from actual oil revenue in 2023.

Further breakdown showed Nigeria’s actual non-oil revenue includes Company Income Tax of N1.2 trillion, Value Added Tax of N327 billion, Customs Revenues of N694 billion, Federation Account Levies of N59.36 billion, and share of Electronic Money Transfer Levy of N17.58 billion.

“Non-oil revenues are more stable and sustainable sources than oil revenue,” Nigeria’s budget Office said in its newly published 2024-2026 Medium Term Expenditure Framework and Fiscal Strategy Paper.

The budget office noted that “Nigeria’s oil revenues remained low even with the passage of the Petroleum Industry Act largely due to PMS subsidy, oil theft, low investment, and generally weak management of the sector”.

“These factors have resulted in a decline in oil revenue, putting pressure on the government’s finances and widening the budget deficit,” Nigeria’s budget office said.

Nigeria’s tepid response to the massive haemorrhage baffles the world.

In August, Nuhu Ribadu, the National Security Adviser, visiting some oil production sites in the Niger Delta, admitted that 400,000 barrels of crude were being stolen daily, equivalent, he said, to $4 million lost every day.

Read also: Corporate tax slump dims non-oil revenue hopes

“Since then, Nigerians have yet to see any new positive action to stop the heist; The theft has become sophisticated, with the thieves deploying electronic surveillance systems in their illegal enterprise. The state has not responded adequately,” Tunde Adeniran, an energy analyst with Sofidam Capital told BusinessDay.

“Years of awarding lucrative pipeline protection contracts to private security companies, some of them run by ex-Niger Delta militants previously accused of sabotaging infrastructure, have also had limited impact,” he added.

Data from Nigeria’s budget office revealed Nigeria’s oil revenue stood at N813 billion in the first seven months of 2023, recording a shortfall of N487 billion gap from a target of N1.3 trillion.

Nigeria’s non-oil revenue stood at N1.83 trillion as at July 2023, N398 billion more than an initial target of N1.43 trillion.

Despite the rise of non-oil income, the actual amount generated from this source remains too low to cover the government’s spending, a sign that Nigeria’s post-oil future is still hanging in the balance.

Non-oil revenue, at N2.38 trillion in 2022, could only cover 16.6 percent of the Federal Government’s expenditure of N14.26 trillion in the period.

The non-oil revenue could also only cover 21 percent of Nigeria’s recurrent expenditure of N11.2 trillion.

“Although the non-oil revenue is growing, the country is still living above its means amid a recurrent expenditure spree,” Lekan Ademola, a Lagos-based asset manager, said.

Over the years, fingers have continued to point at the over-bloated bureaucracies- large ministries, agencies and parastatals- that have become a cog in the wheel of Nigeria’s progress.

“Fuel subsidies had to go for Nigeria’s economy to survive. Having done it, what’s the sacrifice for our political elite? The cost of governance is too high,” Kingsley Moghalu, founder and president of IGET and a former deputy governor of the Central Bank of Nigeria said on X, formerly known as Twitter.

Experts said the costs of Nigerian governance are exceptionally high, and the benefits of that governance go to a small number of the elite group who demonstrate too little concern for the welfare of the Nigerian people.

The bloated size of government comes with high cost of public sector expenditure and its negative impact on the development process in the country, African Development Bank President, Akinwumi Adesina noted in May.

“The cost of governance in Nigeria is way too high and should be drastically reduced to free up more resources for development. Nigeria is spending very little on development.

“Today, Nigeria is ranked among countries with the lowest human development index in the world, with a rank of 167 among 174 countries globally, according to the World Bank 2022 Public Expenditure Review report,” he said.