The worrying take from today’s chart is that the FGN’s retained revenue has covered its recurrent expenditure just twice in the past two years (Q2 and Q3 2018). In Q4 2018 it was 12% below the previous quarter. This can be traced to the shortfall in gross federation account revenue shared between the three tiers of government. These gross inflows for oil and non-oil revenue in Q4 were 24% and 32% short of the pro rata budget projections respectively. The CBN commentary blames maintenance at NNPC terminals and underperformance on FGN independent revenue.
The CBN report shows that the federation account payouts provided 90.4% of the FGN’s retained revenue in Q4, and VAT a further 4.3%.
This contrasts with the 2018 budget, approved in June last year, in which FGN independent revenue is projected to provide 11.8% of the total, the equity restructuring of the oil joint-ventures 9.9% and recoveries 7.2%. The three categories of inflow fall outside the federation account. The restructuring is work in progress (at an early stage).
The FGN’s retained revenue did increase from N3.44trn to N3.76trn in 2018. The trend is consistent with the report from the Federal Inland Revenue Service (FIRS) that it achieved a record total collection of N5.3trn in 2018 (full year). It collects on behalf of the three tiers of government, and not solely the FGN. The remit of the FIRS covers companies’ income tax, VAT and petroleum profits tax.
FGN finances (N bn)
CBN; FBNQuest Capital Research
The CBN has produced its report for Q4 with impressive speed. We should note that the data for the most recent quarter can be subject to substantial revision on the FGN side (rather than the gross federation account series). The data in the implementation reports from the budget office of the federation tend to be more enduring but lag considerably in their release.