Nigeria’s revenue woes worsen with N260bn shortfall in FIRS target

Nigeria’s fiscal managers may have to look out for how to cushion the possible impact on the nation’s spend, as the Federal Inland Revenue Service (FIRS) reported over N264billion shortfall in total tax revenue collection for oil and non-oil in the first-quarter (Q1) to March 2015.

A pressing challenge for the Muhammadu Buhari  administration in government is to boost its non-oil revenues, but the federal revenue agency which set a Q1’15 target of N1.021trillion, reported only N756.709billion, a decline of about 26percent , the worst in recent years.

The FIRS had a quarterly target of N481.88billion for Petroleum Profit Tax (PPT) but actual revenue was N368.59billion, representing 48.71percent contribution to the total tax revenue collection.

Also, its non-oil taxes revenue target for Q1’15 was N539.62billion but actual collection stood at N388.11billion, which represents 51.29 percent contribution to the FIRS total tax revenue collection.

FIRS’ dismal performance reflected in its actual revenue from Company Income Tax (CIT), Gas Income (GI), Capital Gain Tax (CGT), and Stamp Duty.

It had a first quarter target of N241.89billion for Company Income Tax (CIT) but actualised N160.92billion, representing 21.27 percent contribution to the total collection.

Also,only N5.92 billion was actualised, out of the projected N24.084billion in Gas Income Tax,  representing 0.78percent of the N756.709billion collected in Q1’15.

The N2.55billion target in Capital Gains Tax was missed with only N248.6million realised, a paltry 0.03 percent contribution to the total collection; while FIRS missed its Stamp Duty target of N2.11billion with actual collection at N1.98billion, representing 0.26 percent contribution to the total tax revenue collection of N756.709billion in Q1’15. 

“Our suspicion remains that the plugging of leakages will have a more rapid fiscal impact than steps to boost the collection of non-oil revenues. Marked progress in this area would help to allay investor concerns over delays in appointments”, research analysts at Lagos-based FBN Capital said recently.

The analysts feel that the collection agencies focus their efforts on the large and most visible companies, which partly contributes to poor non-oil revenue collection.

In a recent meeting with Senate President Bukola Saraki,  the acting executive chairman of the Federal Inland Revenue Service, Samuel Ogungbesan, linked Nigeria’s revenue decline to developments in the oil market, explaining that the country is having a hard time selling its crude because of a glut in the market and competition US shale oil.

The Federal Inland Revenue Service told the Senate President that over N1.85 trillion was generated as tax between January and June or half-year (H1), as against a cumulative two-quarterly (H1) target in excess of N2trillion in tax revenue.

Giving a summary of revenue performance in the last six months, Odugbesan noted that N697 billion was collected as Petroleum Profit Tax in the first six months of 2015.

If the review agency’s quarterly target is consistent till second-quarter (Q2) it implies that cumulative target for the first and second quarters would be over N960 billion in PPT, already a shortfall in excess of N260billion in PPT.

On the non-oil component, Odugbesan said N778 billion was received as Company Income Tax. Going by the same quarterly yardstick, FIRS may exceed its CIT which expected in excess of N480billion cumulative; while N376 billion realised as Value Added Tax (VAT) in the half year, signposts a possible shortage of about N46billion in relation to N422 cumulative for the two quarters.

The Federal Government has commenced a review of the implementation of pioneer status exemptions, which tax experts expect will unlock up to N36 billion of additional tax revenues in 2015. The House of Representatives has passed the country’s 2015 budget of N4.4trillion.

“The 2015 Budget therefore is aimed at boosting the non-oil sectors of the economy and also aims to raise tax revenues. The introduction of a luxury tax regime buttresses the fact that oil revenue is expected to play a less significant role in 2015 and future years.

“ We hope that government will implement the National Tax Policy and be consistent in its fiscal and monetary policies designed to diversify the economy and increase the country’s tax base”, said Olateju Somorin, president Chartered Institute of Taxation of Nigeria (CITN).

FIRS missed its Value Added Tax (VAT) pool targets in Q1’15. The Nigerian Customs Service (NCS) import VAT target at N52.84billion was also missed, with only N44.50billion actualised, representing 5.88 percent contribution to the total tax revenue collection in that quarter; non-import VAT target of N158.52billion was likewise missed, with only N148.88billion actualised, representing 19.67percent.

The highlights of 2015 budget focused on crude oil (including condensates) production of 2.2782 million barrels per day, benchmark oil price, GDP Growth rate of 5.5 percent, and FX exchange rate of N190 to a dollar, among others. Nigeria’s tax to GDP was reported in the budget presentation as 6% (excluding oil).

Iheanyi Nwachukwu