15 December 2015, Abuja –Despite significant changes to the nation’s economy as a result of the slump in oil prices, the Federal Government has an ambitious plan to raise its revenue profile for the 2016 fiscal year, IFEANYI ONUBA writes
The Federal Government is planning to raise a total of N9.71tn as revenue for the 2016 fiscal period.
Details of the revenue to be raised from both oil and non-oil sources are contained in the Medium Term Expenditure Framework and Fiscal Strategy Paper (2016-2018) sent by President Muhammadu Buhari to the National Assembly.
The document was approved by the Federal Executive Council last Monday and was sent to both chambers of the National Assembly on Tuesday for deliberation and approval.
The projected revenue of N9.71tn for 2016, when compared with the N9.51tn estimated for the current financial year, represents an increase of N79bn or 0.81 per cent.
A breakdown of the proposed revenue shows that the sum of N3.53tn, representing 36.4 per cent, is to be earned from oil sources, while N5.72tn or 58.9 per cent is expected to come from non-oil sources.
Apart from these two major sources of revenue, the sum of N197bn is expected to be raised through dividend payment from the Nigeria Liquefied Natural Gas.
Other items where revenues will be raised, according to the MTEF, are solid minerals, N16bn; non-Federation Account levies, N74.92bn; education tax, N149.82bn; and National Information Technology Development Fund, N21.93bn.
In terms of oil revenues, the document explained that the persistent decline in oil prices since June last year would continue to impact negatively on government revenue in the short to medium term.
For instance, it stated that the development had made the Federal Government to use a conservative figure of 2.2 million barrels per day for oil production, with a benchmark price of $38 per barrel.
It noted, “In recent years, crude oil theft, pipeline vandalism and consequent production shut-ins have continued to undermine government’s investments in the oil sector. Consequently, the actual oil production continues to fall below projection.
“The fall in oil prices since June 2014 is expected to persist in the medium term. The price decline has been largely driven by supply-side factors such as rising crude oil production and supply in the international oil market as well as demand factors such as slowdown in economic activities in major economies and geo-political challenges.”
For non-oil revenues, the document stated that measures had been put in place to ensure that they would make up for the decline in oil revenue.
A breakdown of the N5.72tn non-oil revenue projection showed that the sum of N1.52tn would be earned from Corporate Income Tax, while N265bn would come in from NLNG taxes.
Others are stamp duties, N66.14bn; Capital Gains Tax, N19.47bn; Value Added Tax, N1.47tn; Customs revenue, N862bn; and Federal Government of Nigeria Independent Revenue (surcharge on luxury items, import, excise, fees etc.), N1.5tn.
The document added that the assumption underlying non-oil revenue was hinged on the fact that the economy now had a broader structure as revealed by the rebased Gross Domestic Product figures.
For instance, in the area of Companies’ Income Tax, it stated, “Projections for the CIT are promising as the efficiency factor is expected to improve, given the heightened efforts of the Federal Inland Revenue Service in broadening and strengthening the tax net.
“Also, this is expected to improve as government continues in its efforts to improve on the business environment.”
In the area of VAT, the government noted in the MTEF that the income from this item was predicated on aggregate national consumption of N67.7tn for 2016, up from about N67.5tn for 2015.
It stated, “It is noteworthy that the projections for 2015 assumed the implementation of a 10 per cent increase in VAT rate from mid-year.
“However, this has not been effected. However, because of the increase in aggregate national consumption and renewed efforts at improving revenue, VAT collection is projected to increase by 20 per cent in 2016.”
With regard to the Federal Government’s independent revenue, the report stated that the implementation of Treasury Single Account was expected to shore up revenue collection and remittances by Ministries, Departments and Agencies of government.
The Minister of Finance, Mrs. Kemi Adeosun, had in a bid to shore up government revenue, issued a circular on Friday ordering all the MDAs to henceforth remit 80 per cent of their operating surpluses into the Consolidated Revenue Fund account.
She said the era where agencies generated revenues on behalf of the government without remitting them was over, noting that any agency of government that failed to comply with the directive would be sanctioned in line with the provisions of the Fiscal Responsibility Act.
Section 22(2) of the Fiscal Responsibility Act listed agencies that should remit 80 per cent of their operating surpluses to include the Nigerian Ports Authority, Nigerian Maritime Administration and Safety Agency and Nigerian Television Authority.
Others are the Joint Admissions and Matriculation Board, Nigerian Communications Commission, Corporate Affairs Commission, National Agency for Food and Drug Administration and Control, and National Examination Commission, among others.
The minister said available records showed very poor compliance with the provisions of the Fiscal Responsibility Act.
For instance, Adeosun said some agencies of government had never credited the Consolidated Revenue Fund despite having their salaries, capital and overhead financed by the Federal Government.
She said any accounting officer/chief executive officer of the MDAs that defaults in remitting revenues as appropriate and as when due would be sanctioned accordingly and the renewal of the tenure of appointment of that person would be tied to the compliance with the new guidelines.
The finance minister lamented that cost to income rate of 99.8 per cent had been the average, implying that these agencies spent all their internally generated revenue and subventions released to them.