Revenue Shortfalls Greatest Threat To Nigeria’s Fiscal Viability, FG Laments

President Muhammadu Buhari has said that the huge revenue shortfall being witnessed by the Federal Government remains the greatest threat to the fiscal viability of Nigeria.

Buhari said this on Friday in Abuja during the 2023 budget presentation to a joint session of the National Assembly.

The amended 2022 Budget was based on a benchmark oil price of $73 per barrel, oil production of 1.60 million barrels per day, and exchange rate of N410.15 to a dollar

As at 31st July 2022, the Federal Government’s retained revenues was N3.66trn, excluding the revenue of Government-Owned Enterprises.

Buhari said the revenue collection of N3.66trn was only 63 per cent of the Federal Government’s target, lamenting that this was largely due to the underperformance of oil and gas revenue sources.

Despite higher oil prices in 2022, Buhari further told the lawmakers that oil revenue was below target due to significant oil production shortfalls and high petrol subsidy cost resulting from the significant rise in Crude prices which ultimately increased PMS prices worldwide.

Oil output stood at an average of 1.30 million barrels per day as at June 2022, while the sum of N1.59trn was spent on fuel subsidy between January and June 2022.

The Nigerian National Petroleum Company Ltd, working in collaboration with security and other relevant agencies, is putting in place additional measures to curb the incidence of pipeline vandalism and crude oil theft in order to meet our crude oil production quota.

Buhari said, “As at the end of July 2022, the fiscal operations of the Federal Government resulted in an estimated budget deficit of N4.63trn. This represents 63 percent of the estimated deficit for the full year.

“This is largely attributable to revenue shortfalls and higher debt service obligations resulting from rising debt levels and interest rates.

“The deficit was mainly financed through domestic borrowing amounting to N4.12trn. Hence, total public debt stock increased from N39.6trn as at the end of December 2021 to N42.8trn as at the end of June, 2022.

“However, our debt position remains within cautious and acceptable limits compared to peer countries. As at the end of June 2022, total public debt is within our self-imposed limit of 40 percent of GDP, which is significantly below the 55 per cent international threshold for comparator countries, and a global average of 99 per cent post-COVID-19.

He added, “Nonetheless, our debt-service-to-revenue ratio needs close attention. The current low revenue performance of government, as reflected in the lowly revenue-to-GDP ratio of just about 8 per cent.

“Our medium-term objective remains to raise this ratio to 15 per cent, at which the debt service to revenue ratio will cease to be a concern.

“Mr. Senate President and Rt. Honourable Speaker, revenue shortfalls remain the greatest threat to Nigeria’s fiscal viability.”

The President stated that his administration has accelerated efforts towards ensuring that all taxable Nigerians declare income from all sources and pay taxes due to the appropriate authorities.

He said his government is also monitoring the internally generated revenues of Ministries, Departments and Agencies to ensure they are appropriately accounted for and remitted to the Consolidated Revenue Fund.”

Buhari explained further that the 50 per cent cost-to-income ratio in the Finance Act 2020 has significantly improved operating surplus remittances by Government Owned Enterprises (GOEs).

He solicited the cooperation of the National Assembly in enforcing the legal provision and other prudential guidelines imposed on the GOEs during the consideration of the budget proposals of the GOEs.