Nigeria’s gross revenues gained N135.55 billion, as it rose from N517.8 billion in May 2020 to N653.35 billion by June 2020. The increase in government revenues is attributed to increased crude oil sales, higher tax receipts and a revaluation of foreign exchange gain.
This Accountant General of the Federation, Ahmed Idris, disclosed this over the weekend. The news comes as a massive boost for the Nigerian government after it reported total FG revenue of N1.4 trillion between January and May 2020.
Breakdown of revenue
The N653 billion earned is for both the states, LG and the Federal Government, and was largely driven by vat receipts and sale of crude oil. Nigeria increased its VAT rate from 5% to 7.5% this year increasing revenue accruable to the federation account. The accountant-general also revealed the government earned about N42.83 billion from exchange rate gains following the devaluation of the naira from N306 to N360/$1.
The government is likely to generate more if it proceeds with the unification of the naira, a demand highly favoured by the Minister of Finance Zainab Ahmed. Nigeria’s central bank governor, Godwin Emefiele, confirmed some weeks back that they were considering devaluing the naira around the NAFEX rate which is currently around N388/$1.
Economic Challenges
The coronavirus outbreak early this year prompted a sharp fall in oil prices, which is the nation’s main export, slashing government revenues, weakening its currency, and creating a large financing gap for the country. The global benchmark Brent has since recovered to about $43 a barrel from a 21-year low below $16 in April.
According to the information contained in the government’s MTEF, as at end of May 2020, FGN’s retained revenue was N1.48 trillion, 56% of target:
- FGN share of oil revenues was N701.6 billion while non-oil tax revenues totaled N439.32 bn(65% of revised target).
- Companies Income Tax (CIT) and Value Added Tax (VAT) collections were N213.24 billion and N68.09 billion, representing 62% and 58% respectively of the prorata revised targets for the period.
- Customs collections was N158 billion (73% of revised target).
What it means: Government revenues are in dire straits as evidenced by the 56% drop against budget. The government will rely more on taxes, increase in oil prices, and a more than likely second round of devaluation if it is to fund its recurrent and capital expenditures. A $3.5 billion world bank loan is expected in September to help augment government revenues generation drives.
