New Telegraph

December 3, 2023

2023 Budget: Analysts sceptical over FG’s revenue targets

Although they envisage an improvement in oil revenue as well as strong non-oil revenue performance this year, which according to them, will be driven by higher Value Added Tax (VAT) rate and tax collections, analysts at United Capital Research have expressed scepticism about the Federal Government’s ability to achieve its revenue targets in the 2023 Budget.

The analysts, who stated this while analysing the latest data on the 2022 Budget performance recently released by the Budget Office of the Federation, averred that “the Federal Government’s fiscal position remains weak and would require significant improvements to achieve its ambitious targets.” They said: “According to the Budget Office of the Federation, revenue generation remains the major fiscal constraint of the Federal Government. “Notably, revenue performance printed at 77.6 per cent of the budgeted revenue, as total revenue between Jan – Nov 2022 stood at N5.9 trillion.

Nonoil revenue performance stood at 100.9 per cent, driven by the strong performance in the collection of Company Income Tax (CIT) (129.8% of its target) and Value Added Tax (VAT) (101.7% of its target). “On the other hand, oil revenue underperformed by 70.8 per cent to print at N586.7 billion vs projected N2.0 trillion in the period under review. The underperformance is mainly due to PMS subsidy payment and weaker than projected oil production, with crude oil production averaging 1.38mbpd as of Nov-2022 (compared to the budget benchmark of 1.60mbpd). “The NNPC and FGN blamed the reduced output on theft and production downtime.

Notably, the oil revenue segment continues to disappoint despite crude prices being above the benchmark of $70.0 (Brent crude averaged $99.0 in 2022).” The analysts noted: “As a result of the weaker-thanexpected revenue, the Federal Government has consistently relied on a mix of domestic debt and CBN overdrafts to fund the shortfalls. Notably, domestic debt stock rose by 18.2 per cent y/y to N21.5 trillion in 9M-2022 compared to its print of N18.2 trillion in 9M-2021, while debt to CBN rose N6.3 trillion in 2022. “The rising debt profile remains a worry for the country as the FG spent N5.2tn on debt servicing payments between Jan-Nov 2022. This represents 43.7 per cent more than the projected sum and 89.5 per cent of the total revenue generated during the period.” According to the analysts, with the 2023 budget’s projected revenue at N11.1trillion and the Federal Government’s likely inability to achieve it, would result in a further widening of the country’s budget deficit. According to the analysts, “the Federal Government’s fiscal position remains weak and would require significant improvements to achieve its ambitious targets. Notably, the 2023 budget deficit is estimated at N11.3 trillion, while projected revenue prints at N11.1 trillion.

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