The Federal government missed the mark for revenue projections set out in the 2020 budget for the first five months of the year, in what complicates the government’s effort to give an economy reeling from the coronavirus pandemic and oil price downturn a fiscal spending boost.
Revenue underperformance has become more of the norm in Nigeria since 2016 and has often left the government spending less on critical capital expenditure and with a larger deficit that has been financed through local and external borrowing.
In numbers, here’re what we learnt about the government’s revenue performance in the period between January and May and factors that shaped that performance.
44%
The federal government’s retained revenue was 44 percent short of the target for the first five months of the year, according to data from the budget office, with higher than expected oil revenue unable to provide significant respite.
Total revenue came to N1.48 trillion as against the N2.6 trillion budgeted for the period.
Oil revenue of N701 billion was 66 percent above the budget for the five-month period, with earnings from Mining and Minerals (a relatively little N850 million and 7 percent above the target), the only other income stream that wasn’t below the budget benchmark.
35%
At N439 billion, non-oil revenues were off the mark by 35 percent compared to government expectations of N677 billion for the period.
BusinessDay had earlier published a report where experts flagged what was an overly optimistic non-oil revenue target in the revised 2020 budget that failed to sufficiently account for the economic implications of the coronavirus pandemic on consumption and corporate profits.
Of the income streams under non-oil revenue, Federation account levies saw the biggest variance from the budget at 69 percent, having raked in N339 billion in the period.
At N68 billion, Value Added Tax (VAT) also underperformed the budget by 42 percent. Corporate income tax and customs levies were also off target, accounting for N213 billion (38 percent below budget) and N149 billion (21 percent below budget) respectively.
79%
Independent revenues also failed to hit the target, accounting for only N80 billion- 79 percent lower than the budgeted N388 billion.
For the fourth year running, earnings from government asset sales was completely missing as not a naira of the N96 billion budgeted for the five-month period was achieved even though it was lumped with revenues from domestic recoveries and fines.
100%
For the second year now, nothing was also accounted for as dividend from the Nigerian Liquified Natural Gas Ltd, which the federal government partly owns alongside some international oil companies, (N33.49 billion), while revenue from Stamp duty (N83 billion), Grants and donor funding (N39 billion) also recorded 100 percent underperformance.
Not a single naira of the N77 billion earmarked as specific Grants and donations for the COVID-19 crisis intervention fund was also accounted for.
Implications of flailing government revenue
If the revenue trend for the first five months doesn’t change significantly before the end of the year, Nigeria could be faced with lower chances of implementing capital projects that are critical to economic growth.
That’s already happening, as the government was only able to spend N253 billion as at the end of May on capital projects as against the budgeted N1 trillion for the five-month period.
Low government revenue also threatens the full implementation of a N2.3 trillion fiscal stimulus unveiled by the government to help the economy quickly recover from the damage wrought by the pandemic and low oil prices.
Another implication of lower than planned government revenue is that it feeds into the budget deficit and increases public borrowing.
