FGN’s diversification agenda 2018

Some momentum for non-oil budget revenue

                                                                                          

From the CBN’s Economic Report Fourth Quarter 2017 we can see the limited success of the fiscal branch of the FGN’s diversification agenda. Gross non-oil revenue in 2017 amounted to N3.24trn, and so well short of the target for the full year, implied in the CBN’s commentary, of N5.34trn. Gross oil revenue in the same period of N4.11trn was far closer to budget due to the recovery in oil production and prices. Data from the same source has average crude oil output rising from 1.75 mbpd in Q1 2017 to 1.98 mpbd in Q3.

                                                                                                                  

  • Non-oil revenue peaks in the third quarter because of the deadline for payment of companies’ income tax (CIT). This has been the case every year since 2010, when collection was marginally higher in Q4.

  • The chart does show some positive momentum on the non-oil revenue side. Collection of N815bn in Q4 represented an increase of 22.5% y/y: drilling down into the sub-categories, we see rises of 59.4% for CIT, 21.0% for VAT, and just 7.9% for customs and excise. As the economy has emerged from recession so we would have expected this improved take, most of all from VAT.

  • We also expect that in 2018 non-oil will again underperform oil revenue collection relative to their respective targets. The FGN’s budget proposals have an ambitious assumption for production of 2.30 mbpd. However, we still see some useful room for manoeuvre for the FGN from the price although the Senate has already raised the assumption to US$47/b and may push for another rise in the continuing negotiations.

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