About four months ago, President, Muhammadu Buhari presented a total of N8.83 trillion as the proposed budget for the fiscal year 2019 to a joint session of the National Assembly. Close to N7trillion of that figure, representing 79 per cent of the total, is expected to be financed by government from different revenue resources major of which is oil. Judging by the opinion of experts, Bamidele Famoofo reports that achieving the budgetary target remains a herculean task for the government. The proposed federal government budget is predicated upon revenue projections of N6.97 trillion for the 2019 fiscal year. From the oil sector, the federal government is expecting revenue of about N3.73 trillion, while N710 billion will come from the proceeds of government equity in joint ventures. As part of the government’s non-oil revenue push, it anticipates to receive about N799.52 billion from businesses as part of its own share of company income tax receipt. Also, the federal government’s share of revenue from customs duties and value added tax(VAT) are estimated to come to a region of N302.5 billion and N229.34 billion respectively. Oil Revenue Government’s projection is that about N3.73 trillion or 42 percent of funding will come from the sales of oil. This figure was derived from assumptions of oil price benchmark of $60 per barrel and an oil production of 2.3 million barrels per day. Daily crude oil production estimate of 2.3 million barrels per day is the same amount as budgeted for the 2018 fiscal year.
However, Nigeria currently produces about 1.8million barrels per day, which according to some experts in the oil sector, is believed to be a more realistic production estimate.
Nigeria’s non-oil revenue is mainly divided into value added tax, Corporate Income Tax, customs duties and levies. FG receives 14 percent of the VAT, while other taxes are paid into the Federation Account, which FG is entitled to 48.5 per cent. Nigeria’s non-oil r e v e n u e ( e x c l u d e s independent revenues from agencies by classification) has usually followed the GDP growth and the economic health of the country.
CEO of BudgIT, Oluseun Onigbinde, noted that as oil price and production swings had been critical to Nigeria’s economic growth, foreign reserves and currency stability, non-oil revenue growth has also been strongly influenced by oil. “It is evident that when oil revenue declined in 2016 due to the oil price slump, the growth of non-oil revenue marginally reversed. We see this in the change in Company Income Tax revenue—N1.2 trillion in 2014, N1.0 trillion in 2015, N0.9 trillion in 2016, and back to N1.2 trillion in 2017.” A total VAT uptake of around N229.34 billion was proposed by government for 2019. This amount is higher than about N207.51 billion in 2018. In 2014 and 2015, the federal government’s share of VAT was N106.74 billion and N104.66billion respectively. For the 2017 fiscal year, the federal government’s share of VAT came to about N130.05 billion. A Globalist article states that, “Nigeria doesn’t fare much better with value-added tax and corporate tax. A paltry 9 percent of Nigerian companies pay corporate tax, while only12 percent of registered businesses comply with VAT obligations. With some estimates finding as many as 99 percent of small businesses are unregistered, those percentages are even lower in reality.”
Company Income Tax
For the 2019 fiscal year, the federal government projects a CIT uptake of N799.51 billion, which is an increase from the approved N658.55 billion for the 2018 fiscal year. FG’s share of CIT rose from the 2015 level of N473.32 billion to an estimated N543.34 billion in 2017. As at the third quarter of 2018, actual CIT uptake was at N500.37 billion, a N92.78 billion increase from the actual of N407.59 billion in 2017, for a corresponding period. Considering the trends of the past five years, it will be overly optimistic to believe that the federal government will meet its 2019 CIT revenue projections. “At 30 percent, Nigeria’s CIT rate is higher than the average CIT rate in Africa which is at 28.53 per cent. In the European Union and Asia, CIT rates lie between 18.88 percent and 20.14 percent respectively. With serial reforms to boost corporate taxes which include Voluntary Assets and Income Declaration Scheme (VAIDS), that failed to significantly boost taxes revenues, it is evident that Nigeria lacks the formal private sector depth to deliver huge corporate taxes.”, BudgIT disclosed in its recent report on the budget. BudgIT believes the recent approach of using bank as agent of tax collection has been heavily resisted, but has a potential of increasing the number. “Another N799billion target by FIRS is commendable, but we do not expect magic in FIRS CIT collection which might reach N1.3trillion in 2019, raising FG’s share (48.5 per cent after cost of collection) to around N650billion,” it said.