The underperformance of oil and gas revenue sources pulled down the federal government revenue target by 34 percent between January and July 2021, President Buhari said on Thursday.
By July 2021, Nigeria’s daily oil production averaged one 1.70million barrels (inclusive of condensates) even though the market price of Bonny Light crude averaged $68.53 per barrel – indicating more than $20 above budget estimates.
The 2021 ‘Budget of Economic Recovery and Resilience’ was based on a $40 per barrel oil benchmark, oil production of 1.6m b/d, and exchange rate of 379 Naira to US Dollar.
A Supplementary budget of 982.73 billion Naira was later approved recently by the NASS to address exigent issues in the Security and Health sectors.
Based on the 2021 Fiscal Framework, total revenue of 8.12 trillion Naira was therefore projected to fund aggregate federal expenditure of 14.57 trillion Naira (inclusive of the supplementary budget).
But speaking during his 2022 budget presentation to the joint National Assembly in Abuja, Buhari said the Federal Government’s retained revenues (excluding Government Owned Enterprises) till July amounted to N2.61 trillion against the proportionate target of N3.95 trillion for the seven-month period.
The Federal Government’s share of Oil revenue totaled N570.23 billion – some 51 percent below target, while non-oil tax revenues totaled N964.13 billion.
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“The poor performance of oil revenue relative to the budget was largely due to the shortfall in production as well as significant cost recovery by NNPC to cover the shortfall between its cost of importing petrol and the pump price,” Buhari stated.
In March 2020, the Petroleum Products Pricing Regulatory Agency (PPPRA) had announced that the price of petrol would henceforth be determined by market forces.
But as the combination of rising crude oil prices and exchange rate combined to push the price above the regulated N145 price per litre, opposition against the policy of price deregulation intensified especially on the part of Labour Unions.
Government had to suspend further upward price adjustments while engaging Labour on the subject.
“This petrol subsidy significantly eroded revenues that should have been available to fund the budget,” the President lamented, noting, however, that the government surpassed the non-oil taxes target by eleven percent on aggregate.
According to him, sustained improvement in non-oil taxes indicates that some of the revenue reforms are yielding positive results.
He raised the hope of a further improvement in revenue collections later in the year as more corporate entities file their tax returns and the government accelerates the implementation of our revenue reforms.
To further raise revenues, the president emphasized that the government has stepped up implementation of the strengthened framework for performance management of government owned enterprises (GOEs), with a view to improving their operational efficiencies, revenue generation and accountability.
“The 50percent cost-to-income ratio imposed on the GOEs in the Finance Act 2020 has contributed significantly to rationalizing wasteful expenditures by several GOEs and enhanced the level of operating surpluses to be transferred to the Consolidated Revenue Fund (CRF),” he added.
He further solicited the cooperation of the National Assembly in enforcing the cost-to-income ratio and other prudential guidelines during the consideration of the budget proposals of the GOEs.
