When the curtains fall on 2022, Nigeria’s federal government could see its revenue shortfall hit the highest level in 12 years, available official data collated by BusinessDay show.
The government missed its revenue target by 36 percent in eight months (January-August) but still achieved 83 percent of its spending plan, the latest data from the 2022 budget implementation showed.
Economists are forecasting that the country could record unprecedented revenue underperformance this year.
“Although almost all the key revenue lines underperformed relative to the budget, one of the primary sources of the revenue shortfall was the FGN’s independent revenue,” economists at FBNQuest Capital said in a note sent to BusinessDay.
As of August, the federal government’s retained revenue was N4.23 trillion, a 64 percent decline from the prorata target of N6.65 trillion for the eight-month period.
BusinessDay findings showed the government’s actual independent revenue was down by around 50 percent to N866 billion, compared to a target of N1.7 trillion in the period under review.
Nigeria’s actual oil revenue was down by 72.9 percent to N395 billion as against a target of N1.4 trillion; dividends from the Nigeria LNG were also down by 36 percent to N93 billion, compared to a target of N130 billion.
“According to the assumptions of the 2023 budget, the exchange rate for the conversion of the country’s dollar revenue is N435 but it should be higher than that because in the open market it is over N700 to a dollar,” Muda Yusuf, chief executive officer of Centre for Promotion of Private Enterprise, said.
Yusuf said there are some government-owned revenue-generating agencies that are not remitting what they are supposed to; hence, there is a need for the political will to compel them to remit what is due to the government.
BusinessDay found that actual revenue from government-owned enterprises stood at N566 billion, a 50 percent decline compared to a target of N1.7 trillion for January-August.
Tajudeen Ibrahim, director of research and strategy at Chapel Hill Denham, said the government needs to extend the tax base to capture more potential taxpayers.
“We need to further expand our tax net to include those that are not currently paying taxes but are making taxable profits,” he said.
Other financial experts have stressed the need for the government to stem oil theft and expand the tax net, among other measures.
“It’s the economy that pays the ultimate price for lower-than-planned government revenues as it means reduced public spending on badly-needed infrastructure, a pattern that is becoming historical,” Ernest Bosha, an Abuja-based economist, told BusinessDay by phone.
For many years, Africa’s most populous nation has struggled to meet its revenue target in its budget and the variance keeps getting wider ever since the 2014 global collapse in oil prices that sent the oil-dependent nation to its first recession in a quarter of a century.
Prior to 2014, the federal government’s revenue shortfall – that is the variance between actual and budgeted retained revenues – was in the billion-naira range but with the collapse in oil prices, the difference has stayed within the trillion-naira range.
In 2014, the government’s actual retained revenues stood at N3.727 trillion, based on data obtained from the Central Bank of Nigeria’s quarterly reports. This led to a shortfall of N3.5 billion when compared to the N3.731 trillion projected in the 2014 budget.
In 2015, when the country started feeling the heat from the fall in crude oil prices, the difference between actual and projected revenues ballooned 19.58 percent to about N675.89 billion. In that year, Nigeria realised N2.776 trillion, compared to a target of N3.452 trillion.
The gap, however, widened further at the thick of the economic recession that forced Africa’s biggest oil-producer to look to the non-oil sector to lift the economy from its precarious state. For the first time in many years, the non-oil sector brought in the highest amount of revenue for the government while the oil sector played a second fiddle.
Of the total N2.621 trillion derived as revenue in 2016, non-oil revenue accounted for N824.22 billion while retained revenue from oil stood at N697.80 billion. However, even an increase in non-oil revenue could not narrow the shortfall between actual and budgeted revenues. The difference between the budgeted and actual revenues in 2016 jumped 32 percent to N1.234 trillion.
The same trend continued in 2017 and 2018 when the revenue shortfalls stood at N2.426 trillion and N3.2 trillion, respectively.
In 2017, the federal government’s actual revenue stood at N2.7 trillion, an 81 percent decline compared to a target of N4.9 trillion. For 2018, the government could only manage to generate N3.96 trillion, compared to the N7.16 trillion target in the budget.
In 2019, the federal government achieved revenue of N4.1 trillion, a 40 percent decline compared to a target of N6.97 trillion. For 202o, Nigeria realised revenue of N3.4 trillion, a sharp contrast from the projected revenue of N8.15 trillion.
For 2021, the federal government’s actual revenue stood at N4.64 trillion, a 69 percent decline compared to N7.89 trillion in the budget.
However, the dwindling revenues have not stopped Nigeria from increasing its recurrent expenditure, which has more than tripled.
In the 2022 amended budget, the proposed budget expenditure of Africa’s biggest economy stood at N17.32 trillion, a 57 percent increase from its actual 2021 expenditure of N11.55 trillion
“One thing that is clear to any discerning person is that the next president must find a way to increase revenues and cut out wasteful spending,” said Taiwo Oyedele, an economist, who is also a partner and head of tax and regulatory services at PwC Nigeria.