The CBN’s monthly report for January ’21 shows that the government’s revenue collection continues to be affected by the effects of the pandemic. According to the report, total federally collected revenue fell 13% y/y to NGN807.5bn and was c.5% below the budget benchmark. Of the gross amount, the federal government’s retained revenue amounted to c.N285.3bn, c.41% below its programmed benchmark. For 2021, the federal government has an ambitious revenue target of NGN7.99trn and a huge projected deficit of NGN5.6trn.
Similar to prior years, the government’s non-oil (including independent and other) revenue target is daunting at c.NGN6.0trn. A pattern has emerged over several years of the government missing the revenue target and trimming capital releases. For instance, even after the revisions to the 2020 budget, total realised non-oil (and other) revenue of NGN2.2trn for 2020 was c.46% lower than the anticipated amount.
Non-oil revenue for January ’21 fell short of the budget by almost 20% due to collection deficits in corporate income tax, VAT, independent revenue, and others. However, it increased 18% y/y to NGN441bn, thanks to gains in Customs and Excise, and VAT charges, the latter aided by a 250bp rate hike to 7.5%.
On the other hand, oil revenue of NGN366.5bn surpassed the provisional budget benchmark by 24% due to crude oil prices averaging at USD55 per barrel, compared to the government’s budget assumption of USD40. In comparison to the 1.86 million barrels per day (mbpd) envisaged in the budget, crude oil output has averaged 1.5 million barrels per day (mbpd) since January.
In 2020, non-oil revenue amounted to a paltry 3.1% of GDP, while total revenues to GDP was around 6.0%. Given the revenue constraints and the huge fiscal deficit, we expect the fiscal deficit-to-GDP ratio to be higher than the 3% stated in the Fiscal Responsibility Act of 2007.