FG to deploy key reforms to improve revenues

The Federal Government is to embark on a set of key Reform Initiatives to Improve Revenues to enable it fund the proposed N8.61 trillion spending in 2018, and as well keep borrowings low following wide concerns over the country’s surging debt.

The minister of Budget and National Planning, Udoma Udo Udoma said Tuesday while giving a breakdown of the proposed 2018 budget that government is taking steps to deploy new technology to improve revenue collection, tighten performance management framework for State Owned Enterprises (SOEs), and enforce a Stronger action against tax defaulters.

Based on the 2018 budget fiscal assumptions and parameters, total federally-collectible revenue is estimated at N11.983 trillion in 2018.

Government projects to expand more revenues through new funding mechanism for JV operations, allowing for Cost Recovery in lieu of previous cash call arrangement. The government projects to generate up to 10.7% of the expected revenues through JV Equity Restructuring .

Additional oil-related revenue including Royalty Recovery, New/Marginal Field Licences, Early licensing renewals are also being expected.

The government also intends to review the fiscal regime for Oil Production Sharing Contracts (PSCs), according to the budget minister.

Udoma also announced plans to restructure government’s equity in JV oil assets, (reduction in equity holding) with proceeds to be reinvested in other assets.

“This will improve efficiencies in the operations of the JVs and position them for better revenue performance in the future,” he stated.

President Buhari, last Tuesday, presented the spending plan for 2018 for the National Assembly to approve.

The 2018 Budget is designed to consolidate on the achievements of the 2016 & 2017 budgets, and advance delivery of the goals of the Economic Recovery and Growth Plan (ERGP).

Udoma said the key parameters of the Budget are as articulated in the ERGP, including Oil Production estimated at 2.3 mbpd, Oil Price $45/b, N305/$ Exchange Rate, 12.42% inflation rate, N83.69 trn Nominal Consumption, N113.09 trn Nominal GDP as well as 3.5% GDP Growth Rate.

While presenting the composition of the budget to a gathering of government officials, Professional & Business Associations, Captains of Industry, Commerce & Finance, Civil Society Organizations, Development partners, Media Practitioners, among others in Abuja, Udoma announced of government intention to raise Excise duty rates on alcohol and tobacco.

He also raised the hope that Tax Administration improvement,
seen in ongoing initiatives, including Tax amnesty programme would positively affect collection efficiencies across various tax categories.

As contained in the budget, Oil Revenue is projected to make up 37 percent of total revenues, Company Income Tax (CIT ), 12%.
The government also hopes that the Value Added Tax VAT would generate up to 3.1% of the expected incomes, while Customs would make up to 4.9%, Independent Revenue – 12.8%, Recoveries – 7.8%, Tax Amnesty – 1.3%, and Signature Bonus – 1.7%., Grants & Donor Funding – 3%, and others Others – 5.5%.

“We have reflected projected proceeds from oil assets ownership restructuring as revenues for transparency & monitoring as the expected funds have been earmarked to fund critical capital projects,” he stated at the event.

He also remarked that the fed‎eral government is working to improve GOES revenue performance by reviewing their operational efficiency and cost-to-income ratios and generally ensuring they operate in more fiscally responsible manner.

Udoma pointed out that the 2018 Budget proposals seek to continue the inflationary policies of the 2016 and 2017 Budgetes which helped put the economy back on the path of growths.

Udoma remarked that the 2018-2020 Medium term Fiscal Framework‎(MTFF) and thw Budget Proposals reflect many reforms and initiatives in the ERGP,which is our roadmap to economic recovery and a more sustainable growth,projects are linked to government’s policies and strategic priorties.

Kemi Adeosun, Minister of Finance says the Federal Government at the event clarified that the government has not granted any Tax Holiday to any company operating in Nigeria,rather it is doing tax exchange with companies who are willing to do some key roads that have economic linkage to government business in exchange to the amount they will pay in taxation.

Adeosun noted that the federal government is still constrained to 100 percentage of budget implementation because of shrinking revenue and increased apathy to tax payment in the country,which has been on the increase since the oil boom.

The Minister while fielding questions on Tuesday at the 2018 budget proposals breakdown said the government is prioritising tax and has not and will not give out any Tax Holiday to anybody with the current situation of the economy,which recently eased out of recession at 0.55 percent.

Adeosun said,”The beauty of tax payment is that it is progressive. The Problem we have in Nigeria is that we only have about 14 million tax payers,while we have about 69 million people working or doing one form of economic activity or the other and are not paying”

Out of that 14 million people,the majority of them are salary earners,but the highly networked are either not paying or not paying enough.‎ That is is what we simply want to correct with the VAT programme,Adeosun pointed out.

She clarified further stating that,‎”What happened to us was that oil came,we decided that we did not need tax anymore,and we had so much oil that we relegated tax paying,which was wrong. We discovered as an administration that that model is a wrong model,and we are working hard to address that”

Adeosun said,”Let me tell you Saudi Arabia produces 10million barrels of oil everyday and with 30 million people to share.On the contrary, we produce 2 million barrels of oil per day with over ‎180 million plus.So,tax is what you need to sustain government’s revenue at this critical point.”

‎She regretted the culture of increase apathy in tax payment starting that:”We have come a longway with a culture in the last 35-40 years with of an apathy to tax payment. We have to re-invent that culture of paying tax.We have to come together and do the right thing.‎”

She remarked that many people have two or three income,and we are saying that if everyone comes in and pays the right thing,we could drive our revenue to an appreciable height. We cannot afford to be like Saudi Arabia,we don’t have their oil.

She said,”There are some other countries who have some oil and are still embarking on Tax payment,such as Mexico,and others,and their tax to GDP ration up to 16.‎”

‎A breakdown of where the money is coming from to finance the budget shows that:” Share of oil revenue-N2,441.56bn ;Share of Dividend N29.92bn;Share of Minerals& Mining N1.17bn;Share of non-oil N1,385.28bn;Share of CIT N794.69bn;Share of VAT N207.86bn;Share of Customs NN324bn; and of Share of Federation Acct.Levies N57bn.

Also Independent revenue is put at ‎N57bn;federal government’s share of actual balance in special accounts N9.3bn;Federal government’s balances in special accounts N17.21bn;Federal Government’s unspent balance of previous fiscal year N250bn;Federal government’s share of Tax amnesty income, N87bn; Federal government’s share of signature bonus N114.30bn; Recovery of Swiss ($320million)domestic recoveries plus asserts and finesN374bn;Other federal government’s recoveries N138bn;earmarked funds such as funds proceeds of Oil assets ownership restructuring N710bn; in addition to grants and donor funding N199,92bn.

‎Further breakdown of the Government spending on 2018 budget estimates is currently put at N8.61 trillion,exceeding FY2017 projection by 16%.

The breakdown also reveals that N2.01 trillion,debt service is 23% of planned spending(About the same as in 672017).Also provision to retire maturing bond to local contractors increased by 24% from N177 billion in 672017 to N220‎ billion in view of the ambitious plan to liquidate all contractor arrears of the FGN going back to several years.

Also,recurrent(non-debt) spending expected to rise by 17% from N2.99 trillion in FY2017 to N3.49 trillion.Accordingly,Capital expenditure(including transpfers)higher ny 12% from N2.36 trillion in FY2017 to N2..65 trillion.

Also,Capital spending is 30.8% of total federal government’s expenditure in 2018 in the budget estimates.

Overall budeget deficit of ‎N2.005 trillion in 2018 represents 1.77% of the GDP.Also,the projected deficit within threshold stipulated in the Fiscal Responsibility Act 2007.Also,budget deficit is to be financed mainly by borrowing N1.699 trillion.Domestic sources-N850 billion,foreign sources-N849 billion.

A total of N306 billion is expected from privatisation proceeds and N5billion from sale of other government property to part the finance deficit.

Personnel cost of the MDAS account for 61% of non-debt recurrent spend.10% allocated to special interventions;7% for over heads;10% for Pensions(SWF & CRF)‎;2% to Presidential ammnesty programme;5% to other service wide votes; and 6% as SWV provisions for the power sector reco ery programme.


Onyinye Nwachukwu, Abuja

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Author: Onyinye Nwachukwu, Abuja