By Alonso Soto and Tope Alake
The government raised 2020 budget revenue target by 7%
Nigerian President Muhammadu Buhari has raised the country’s revenue goals for next year even after repeatedly missing past targets by a wide margin.
Africa’s top oil producer foresees government revenues of 8.155 trillion naira ($22.7 billion) in 2020, Buhari said while presenting a 10.33 trillion-naira expenditure plan to parliament on Tuesday.
The revenue target is 7% higher than this year’s estimates. The government had only collected 58% of 2019 revenue as of June, Buhari said. This was due to shortfalls in both oil and non-oil earnings with the government takings from crude sales 49% below target as of June. Buhari warned of “severe consequences” to agencies in charge of tax collections if targets are missed again.
Nigeria has been unable to meet income targets since 2015 constraining expenditure
Nigeria has missed annual earnings projections every year since 2016, according to the budget office. Nearly 60% of Nigerians didn’t pay taxes, according to survey of 10,000 adults carried out in 2018 by the Nigerian Economic Summit Group.
To boost income the government plans to increase the consumption tax rate to 7.5% from 5%, one of the lowest on the continent. Buhari also said the government was going reintroduce a bill to review the terms of deep offshore oil field contracts to raise an extra $500 million in 2020.
“Even those two reforms he is anticipating will not be enough to meet the ambitious revenue estimate,” said Omotola Abimbola, a macro and fixed-income analyst at Chapel Hill Denham in Lagos.
West Africa’s biggest economy expects a 2020 budget deficit of 2.18 trillion naira, or the equivalent of 1.52% of gross domestic product, below the shortfall of 2.47 trillion forecast for this year. The fiscal gap will be financed through borrowing from local and international markets and privatizations.
“They need to cut their expenditure,” Ayodeji Ebo, managing director at Afrinvest Securities in Lagos, said by phone.
“With the way the government is going about its revenue drive, they may further burden the existing companies and individuals paying taxes.”
(Updates third paragraph with shortfalls in oil revenues)