Nige­ria’s Econ­omy Still Vul­ner­a­ble to Oil Shocks, Says IMF

Pre­dicts 2% GDP growth in 2018 FIRS rakes in record N2.5trn in 6 months

THISDAY - - FRONT PAGE - Obinna Chima in La­gos and Ndubuisi Fran­cis in Abuja

The In­ter­na­tional Mon­e­tary Fund (IMF) has stated that de­spite the re­lief higher oil prices and short-term port­fo­lio in­flows have pro­vided to Nige­ria’s econ­omy, the coun­try re­mains vul­ner­a­ble to oil price and pro­duc­tion shocks.

A team from the mul­ti­lat­eral in­sti­tu­tion made these ob­ser­va­tions af­ter a visit to Nige­ria, just as the Fed­eral In­land Rev­enue Ser­vice (FIRS) said that it grossed a to­tal of N2, 529,615,174,601.25 from var­i­ous taxes be­tween Jan­uary and June 2018.

The IMF team led by Se­nior Res­i­dent Rep­re­sen­ta­tive and Mis­sion Chief for Nige­ria, Amine Mati, vis­ited Nige­ria be­tween June 27 and July 9, 2018 to dis­cuss re­cent eco­nomic and fi­nan­cial de­vel­op­ments, update macroe­co­nomic pro­jec­tions, and re­view re­form im­ple­men­ta­tion with top gov­ern­ment of­fi­cials.

The mis­sion in a state­ment yes­ter­day urged the fed­eral gov­ern­ment to take ur­gent

ac­tion "on a co­her­ent set of poli­cies to re­duce vul­ner­a­bil­i­ties and in­crease growth over the medium term re­mains."

It pre­dicted that growth would pick up to about 2 per­cent in 2018, weighed down by lower than ex­pected oil pro­duc­tion and rel­a­tively weak agri­cul­ture growth.

Specif­i­cally, the mul­ti­lat­eral or­gan­i­sa­tion noted that al­though “higher oil prices and port­fo­lio flows, have helped strengthen fis­cal and ex­ter­nal buf­fers, the out­look for 2018 re­mains chal­leng­ing, as pri­vate sec­tor lend­ing re­mains low while for­eign ex­change in­flows are mostly short-term.”

Pre­cisely, the IMF rec­om­mended spe­cific and sus­tain­able mea­sures to in­crease the cur­rently low tax rev­enue - in­clud­ing through avoid­ing new tax ex­emp­tions - and en­sur­ing bud­get tar­gets are ad­hered to even in an elec­tion year.

Ac­cord­ing to the IMF, this process should be sup­ported by keep­ing mon­e­tary pol­icy tight through ap­pro­pri­ate mon­e­tary pol­icy tools that will help con­tain in­fla­tion­ary pres­sures and sup­port a move to­wards a uni­form mar­ket­de­ter­mined ex­change rate.

It pointed out that mov­ing ahead with struc­tural re­forms was needed to in­vig­o­rate in­clu­sive growth, par­tic­u­larly in the power sec­tor where it noted that faster progress would be needed to en­sure fi­nanc­ing short­falls in the sec­tor are met in a sus­tain­able man­ner.

The state­ment added: “Higher oil prices and short-term port­fo­lio in­flows have pro­vided re­lief from ex­ter­nal and fis­cal pres­sures, but the re­cov­ery re­mains chal­leng­ing. In­ter­na­tional re­serves re­mained sta­ble at about $47 bil­lion, sup­ported by some con­ver­gence in ex­ist­ing for­eign ex­change win­dows, and de­spite some re­ver­sal of for­eign in­flows since April.

“In­fla­tion de­clined to its low­est level in more than two years. Real Gross Do­mes­tic Prod­uct (GDP) ex­panded by two per­cent in the first quar­ter of 2018 com­pared to the first quar­ter of last year.

“How­ever, ac­tiv­ity in the non-oil non-agri­cul­tural sec­tor re­mains weak as lower pur­chas­ing power weighs on con­sumer de­mand and as credit risk con­tin­ues to limit bank lend­ing.

“Cor­po­rate tax col­lec­tion ef­forts im­proved but rev­enue short­falls and the late adop­tion of the 2018 bud­get im­pede its im­ple­men­ta­tion.”

How­ever, the Wash­ing­ton- based in­sti­tu­tion noted that rev­enue from higher oil prices in Nige­ria was lim­ited by net losses from re­tail fuel sales while non-oil rev­enue has re­mained be­low ex­pec­ta­tions, with yields from tax ad­min­is­tra­tion mea­sures - in­clud­ing the Vol­un­tary As­set In­come Dec­la­ra­tion Scheme (VAID) and in­creased tax au­dits - yet to fully ma­te­ri­alise.

It stated that cur­rent pub­lic spend­ing in Nige­ria had re­mained in line with ex­pec­ta­tions, stat­ing that car­ry­over from 2017 to 2018, helped in­crease cap­i­tal spend­ing in the first four months of 2018, de­spite de­layed ap­proval of the 2018 bud­get.

It added: “Lower yields have kept in­ter­est pay­ments within the bud­geted en­ve­lope, but the fed­eral gov­ern­ment’s in­ter­estto-rev­enue ra­tio is ex­pected to ab­sorb more than half of rev­enues this year.

“Re­forms to im­prove the busi­ness en­vi­ron­ment are pro­gress­ing, in­clud­ing through iden­ti­fi­ca­tion of pri­or­ity in­vest­ment projects and the adop­tion of the Com­pany and Al­lied Mat­ters Act (CAMA) - a leg­isla­tive land­mark for pri­vate sec­tor de­vel­op­ment.

“The im­ple­men­ta­tion of the Power Sec­tor Re­cov­ery Plan is ad­vanc­ing through a mini- grid pol­icy and reg­u­la­tions on el­i­gi­ble cus­tomers and me­ter as­set providers.

“Un­der cur­rent poli­cies, the out­look re­mains chal­leng­ing. Growth would pick up to about two per cent in 2018, weighed down by lower than ex­pected oil pro­duc­tion and rel­a­tively weak agri­cul­ture growth.

“The fis­cal deficit would nar­row slightly, with higher oil rev­enues off­set­ting in­creased spend­ing, in­clud­ing those planned in a sup­ple­men­tary bud­get. In­fla­tion would pick up in the se­cond half of 2018 as base ef­fects dis­si­pate and higher spend­ing and sup­ply con­straints in agri­cul­ture put pres­sure on prices. “In­creased oil ex­ports would keep the cur­rent ac­count in sur­plus, help­ing sta­bilise gross in­ter­na­tional re­serves even if the cur­rent pace of for­eign port­fo­lio out­flows con­tin­ues.”

FIRS Nets N2.5trn in 6 Months

Mean­while, the Fed­eral In­land Rev­enue Ser­vice (FIRS) grossed a to­tal of N2, 529,615,174,601.25 from var­i­ous taxes be­tween Jan­uary and June 2018.

The N2,529,615,174,601.25 is an in­crease of N746,107,323,247.26, a 42 per cent rise when com­pared to the N1,783,507,851,353.99 to­tal tax rev­enue re­alised in the cor­re­spond­ing pe­riod in 2017.

The amount in­di­cates that the Ser­vice had re­alised 75 per cent of its to­tal target for the year, which is an im­prove­ment in the cor­re­spond­ing pe­riod of 2017.

Di­rec­tor, In­for­ma­tion at the Min­istry of Fi­nance, Has­san Dodo dis­closed in a state­ment that a report on the rev­enue per­for­mance by the agency, sub­mit­ted to the Min­is­ter of Fi­nance, Mrs. Kemi Adeo­sun, con­firmed that the N2,529,615,174,601.25 has an in­crease of N746,107,323,247.26, rep­re­sent­ing 42 per cent, when com­pared to the N1,783,507,851,353.99 to­tal tax rev­enue re­al­ized in the cor­re­spond­ing pe­riod in 2017.

An anal­y­sis of the to­tal amount showed that N1,168,627,365,306.67 was col­lected as Pe­tro­leum Profit Tax (PPT) as against N636,170,585,753.57, re­sult­ing in a vari­ance of N532,456,779,553.10.

From the Com­pany In­come Tax (CIT), the FIRS re­alised a to­tal of N680,093,730,362.25, which was N128,151,996,465.68 more than the N551,941,733,896.57 in the pre­vi­ous year.

The Value Added Tax (VAT) yielded a to­tal of N536,525,540,228.39 in the pe­riod un­der re­view, which was N68,841,756,240.06 more than the N467,683,783,988.33 re­al­ized in 2017.

The Ed­u­ca­tion Tax brought in N77,191,051,329.11 com­pared to the N58,868,372,910.79 in 2017, show­ing an in­crease of N18,322,678,418.32

The rev­enue from Stamp Du­ties was N7,492,592,658.35, which was N2,346,472,953.70 higher than what was re­alised in 2017 from Stamp Du­ties which was a to­tal of N5,146,119,704.65.

The FIRS said it re­alised N1,006,543,151.07 from cap­i­tal Gains Tax , an anal­y­sis of which showed that the amount was N64,916,270.95 more than the N 941,626,880.12 in 2017.

From NITDEF, a to­tal of N9,249,618,573.91 was re­alised, re­sult­ing in an in­crease of N736,357,883.29 when com­pared to the to­tal of N8,513,260,690.62 in 2017.

The Con­sol­i­dated Tax Rev­enue for Jan­uary to June 2018 was 49,428,732,991.50; an amount that was higher than the N54,242,367,529.34 by a to­tal of N4,813,634,537.84.

With con­tin­u­ous rev­enue gen­er­a­tion strate­gies, the FIRS ex­pressed op­ti­mism that its ef­forts will have sig­nif­i­cant out­come, par­tic­u­larly in in­creas­ing rev­enue for 2018.

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