FIRS under pressure on back of declining petroleum profit tax

Nigeria’s revenue collecting agency, Federal Inland Revenue Service (FIRS), looks set for further rough ride with high expectations of boosting the nation’s coffers with about N4.5 trillion in 2016.

The Babatunde Fowler-led executive at FIRS had set this target as part of the agency’s contribution to Africa’s biggest economy’s budget spends for 2016.

A major obstacle to this target, as shown in recent trend, is the declining Petroleum Profit Tax (PPT), a major source of revenue for the Federal Government to meet its statutory obligations.

“There are good reasons for thinking that this year’s target may also prove overly challenging,” said research analysts at Lagos-based investment house, FBNQuest, in their recent note ‘challenging targets for the FIRS.’

BusinessDay check at the FIRS shows that with over three quarters to September 30, 2015, the FIRS was nowhere near achieving its PPT targets. In first quarter (Q1’2015), the FIRS set PPT revenue target of N481.8 billion but actual collection was N368.59 billion.

Also in Q2’15, it set a target of N 481.88 billion for PPT revenue but was able to achieve N306.14 billion, while in Q3’15, FIRS set a PPT revenue target of N371.2193 billion but actual collection was N325.865 billion.

The revenue agency is yet to release its fourth-quarter to December 2015 revenue statistics. Already, recent dip in oil price to 2003 lows put the nation’s revenue from PPT close to zero level.

“The distribution of December revenues may well be announced at the end of this week. Given the latest downward leg in the oil price, the three tiers should be bracing themselves for more bad news,” FBNQuest research analysts said recently.

From a record 2003 lows, oil prices rose more than 3 percent on Tuesday, as data showed Chinese oil demand likely hit a record high in 2015, but contracts remained near 12-year lows as the IEA said the market should stay oversupplied this year.

Brent crude futures, the global benchmark, traded up $1.06, or 3.7 percent, at $29.61 a barrel, while US crude futures were up 30 cents at $29.72 a barrel, reverting to a discount to Brent prices. Both contracts breached the $30 mark earlier in the session.

FIRS total revenue for 2015 shows it targeted N1.02 trillion in Q1’15 but actual collection stood at N756.7 billion; Q2’15 revenue target was N 1.021 trillion while actual collection was N1.188 billion. In Q3’15, it set a revenue target of N1.143 trillion while actual collection was N980.48 billion.

“From where we stand, it seems clear that at the very least the specific policies and implementation drive in each specific area of the economy will go a long way towards overcoming the odds posed by the endemic issues that continue to make this a challenging domestic macro-environment going into 2016,” said research analysts at another Lagos-based investment house, ARM.