We can see from CBN data that federally-collected revenues continue to run short of budget. Collection has risen but from a low base. For the 13 months through to August, total non-oil collections did not once reach the pro rata budget figure of N467bn: the take from companies’ income tax (CIT), and customs and excise hit the target three times and twice respectively. These federally-collected revenues are transferred to the federation account for distribution after small transfers to the VAT Pool account and to cover the FGN’s independent receipts.
- VAT collections were steady (see chart), which we would expect in an economy in slow-growth mode.
- They fell far short of budget throughout the period. Since the FGN had no plans to increase the 5% standard rate and had modest growth expectations, we wonder at the ambitious budget for collections. We can only guess that the authorities assumed strong efficiency gains.
- The Federal Inland Revenue Service (FIRS) is targeting large companies on the basis of the data-mining carried out by the federal finance ministry with external consultants. It has started to lean on banks to freeze the accounts of companies said to be in default on their tax payments. There may be a short-term benefit in higher collections.
Federally-collected non-oil revenues (gross; N bn)
Sources: CBN; FBNQuest Capital Research
- The vice-president, we understand, said at the current annual conference of the Nigerian Economic Summit Group in Abuja that the tax collection/GDP ratio has risen from 6% to 8%. This progress will have to be accelerated if the FGN is to come close to its projections for non-oil tax revenues in 2019 (Good Morning Nigeria, 24 October 2018).
- Comparable emerging economies including non-oil producers are achieving ratios of +/- 20% of GDP.