Yesterday, local print media sources quoted the Minister of Finance, Budget & National Planning ‘saying the Federal Government has identified initiatives it would take to generate Revenue of N13.0tn – N18.0tn in order to achieve its Revenue to GDP ratio of 15.0%. In the statement credited to her, she stated that State Governments would have a quota of N3.4tn to contribute to the target. These initiatives were identified under the Strategic Revenue Growth Initiative (SRGI) of the government which was inaugurated last year.
Nigeria has faced significant revenue challenges in recent years. Actual Revenue has consistently underperformed budgeted revenue with average revenue performance of 63.6% between 2014 – 2019. The fiscal condition of the Federal Government has been exacerbated with the pandemic affecting both oil and non-oil revenue sources. According to the Minister of Finance, Federal government Revenue in Q1 2020 was N951.0bn against a pro-rated budget of N2.0tn within the quarter. Underperformance in revenue targets has led to sustained increase in Nigeria’s debt levels with the government increasingly relying on external and domestic borrowings to finance its fiscal deficit. The attendant impact of this has been a spike in Debt Service to Revenue ratio to 99.2% in Q1 2020 (FY 2019 – 59.4%).
While the Minister did not provide highlights of the said initiatives identified to boost and diversify revenue, we reiterate our opinion that the Federal Government has to prioritise the subject of revenue diversification. The impact of the global pandemic has further intensified the need to do so. Efforts must be deepened to broaden the tax net, opportunities in many underutilized sectors such as mining & tourism must be exploited while the Federal
Government should also focus on implementing policies and providing needed infrastructure to drive business growth, which will enhance corporate profitability and in turn tax revenue.
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