VALUE Added Tax, VAT, and Company Income Tax, CIT, rose by 35 per cent, year-on-year, YoY, to N1.2 trillion in the first quarter of the year (Q1’22) from N888.5 billion in the corresponding period of last year (Q1’21).
Vanguard Public Finance findings in the VAT and CIT data for Q1‘2022 released by the National Bureau of Statistics, NBS, showed that CIT recorded stronger growth at 35 per cent as against the 18 per cent growth recorded in VAT during the review period.
While the total VAT collections rose to N588.6 billion in Q1’22 from N496 billion in the corresponding period of last year, indicating 18 per cent increase, the CIT revenue rose to N532.5 billion in Q1’22 from N392.65 billion in Q1’21, indicating 35 per cent increase.
Budget 2022 expectation
Meanwhile, the federal government planned to spend the sum of N13.98 trillion in the implementation of its 2022 budget with expected revenue of N8.76 trillion.
In the 2022 budget, a sum of N3.6 trillion was provided in respect of Debt Service, made up of N2.5 trillion for Domestic Debt, and N1.1 trillion for Foreign Debt.
The 2022 budget has a deficit of about N6.25 trillion, approximately 3.39 per cent of GDP. This is slightly above the 3 per cent ceiling set by the Fiscal responsibility Act 2007 (FRA).
However, President Mohammadu Buhari explained that the expenditure level was necessary to assist with overcoming current security challenges and accelerate post-
post-recession growth. The President insisted that Nigeria only has a revenue challenge and not a debt sustainability problem.
The 2022 budget deficit forced the federal government to issue new borrowings of N5.012 trillion (of which domestic – N2.506 trillion and foreign – N2.506 trillion); drawdowns on Project-tied Multilateral/Bilateral loans – N1.156 trillion; and Privatisation Proceeds of N90.73 billion according to Debt Management Office.
The International Monetary Fund (IMF) in its 2021 Article IV projected that FG could spend as much as 92.6 per cent of its revenue on debt servicing this year.
Analysts at Cowry Asset Management Plc in their update on the country’s Debt report for Q1’22, noted that given the widening public debt stock and paucity of revenues interest payments for these debts would gulp a larger chunk of FG’s revenues in 2022 and beyond
They said: “Nigeria’s domestic debt service is on the rise with a 9 per cent year-on-year increase to N668.7 billion in the first quarter of 2022.
“But given the widening public debt stock and paucity of revenues, it is a no-brainer that interest payments for these debts will eat up a larger chunk of the federal government’s revenues in 2022 and beyond.”
The Debt Management Office, DMO, said that in Q1 ‘22 Nigeria’s total external and domestic debt stock hit N41.6 trillion indicating a 25.6 year-on-year surge from N33.11 trillion in Q1’21.
However, further breakdown of the domestic debt figure showed that FG’s domestic debt stock was at N20.14 trillion after it rose 22% year-on-year while the states and FCT debts constituted N4.84 trillion.
Cowry Asset Management Plc further said: “Research sees Nigeria’s debt levels and debt
service costs staying unabated in some years to come as parts of FG’s revenues continue to be eaten up by interest payments due to revenue shortcomings of FG.
“This further counters the view of the CBN at its Monetary Policy Committee assembly in May, where it noted that its monetary tightening stance may support the moderation of government’s domestic borrowing following the rise in the cost of debt on the international capital market.”
Analysts at FSDH Merchant Bank in their Macroeconomic projection for 2022 noted that the nation’s budget deficit is expected to increase to N7.4 trillion in 2022 following a lower revenue projection resulting from the increased provision for fuel subsidy, which was hiked from N0.44 trillion to N4 trillion.
They said: “Budget deficit is expected to increase to N7.4 trillion in 2022, following a lower revenue projection and a higher expenditure outlay. The reduction in revenue is partly due to the increased provision for fuel subsidy, which was hiked from N0.44 trillion to N4 trillion. •
“This suggests that Nigeria may not benefit from the increase in crude oil price due to the high cost of subsidy/petrol imports which will add pressure on government finances and the exchange rate.
“With this, we expect government borrowing as well as Nigeria’s total debt stock to trend upwards in 2022.”
FG, states, LGs share N680.8b
Meanwhile, the Federation Account Allocation Committee (FAAC), last weekend, shared the sum of N680.783 billion to the three tiers of government as federation allocation from revenues earned in the month of May.
A breakdown of the total distributable revenue was drawn from the Statutory Revenue of N385.004 billion, Value Added Tax (VAT) of N198.512 billion and Electronic Money Transfer Levy (EMTL) of N97.267 billion.
Analysis of the distribution showed that the Federal Government received N229.563 billion, the States received N241.824 billion, the Local Government Councils got N175.942 billion, while the Oil Producing states received an additional N33.454 billion as derivation, (13% of Mineral Revenue).
The FAAC at the end of the meeting, in Abuja, indicated that the Gross Revenue available from the Value Added Tax (VAT) for May 2022 was N189.512 billion.
The distribution is as follows: the Federal Government got N29.777 billion, the States received N99.256 billion, Local Government Councils got N69.479 billion.
Accordingly, the Gross Statutory Revenue of N385.004 billion was distributed, from which the Federal Government was allocated the sum of N185.197 billion, States got N93.934 billion, LGCs got N72.419 billion, and Oil Derivation (13% Mineral Revenue) got N33.454 billion.
A further analysis showed that the sum of N97.267 billion was recovered from the Electronic Money Transfer Levy (EMTL) and distributed as follows: the Federal Government got N14.950 billion, the State received N48.634 billion and the Local Government Councils got N34.043 billion.
Companies Income Tax (CIT) and Value Added Tax (VAT) recorded considerable increase; Import Duty increased marginally while Petroleum Profit Tax (PPT) and Excise Duties also decreased marginally. However, Oil and Gas Royalties decreased significantly.
The balance in the Excess Crude Account (ECA), as at 24th June, 2022 was put at $35.377 million.