FG Slashes 2017 Independent Revenue by N298bn

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  • FG Slashes 2017 Independent Revenue by N298bn

The harsh economic climate, which has resulted in the slowdown of business activities, may have forced the Federal Government to reduce its projected independent revenue from N1.5tn in 2016 to N1.2tn.

Independent revenues of government are funds generated by agencies as captured by the Fiscal Responsibility Act of 2007, which stipulates that any government agency that generates revenue must remit 80 per cent of their operating surplus to the Consolidated Revenue Fund account.

Some of these agencies are the Central Bank of Nigeria, Nigeria Deposit Insurance Corporation, Securities and Exchange Commission, Nigerian Shippers Council, Nigerian Export Promotion Council, National Health Insurance Scheme, Nigerian Civil Aviation Authority, and Nigerian Communication Commission.

The reduction is part of the proposals contained in the Medium Term Expenditure Framework and Fiscal Strategy Paper, which has been submitted by the executive to the National Assembly.

The MTEF, which is currently before the National Assembly and awaiting legislative approval, provides the basis for annual budget planning and consists of a macroeconomic framework that indicates fiscal targets, estimates, revenues and expenditure, including government financial obligations in the medium term.

The document, prepared by the Ministry of Budget and National Planning, also sets out the underlying assumptions for these projections; provide an evaluation and analysis of the previous budget; and present an overview of consolidated debt and potential fiscal risks.

In the document, a copy of which was obtained by our correspondent in Abuja, the Federal Government said the current economic realities had necessitated a downward review of the independent government revenue.

It listed some of the factors that might affect revenue projections in the 2017 fiscal period as slowdown of economic activities, which would affect tax revenue; insurgency in the North-East; lags in fiscal spending; the issue of climate change, which would affect revenue based on agricultural productivity.

The document read in part, “Government recognises the potential implications of a strong non-oil revenue drive and is, therefore, working to ensure proper coordination of its policies in a manner that will not be counterproductive or distort medium-term fiscal projection.

“Slowdown in economic activities as well as insurgency in parts of the North-East remains potential risks to non-oil revenue. While insurgency contributes to the moderation of taxable activities around the region, lags in fiscal spending in critical economic sectors resulting from shortfalls may drag activities in the real sector with implications for government tax revenues as well as social welfare.

“There are also concerns about climate change effects on rainfall, and consequently, on agricultural productivity with spillover effects on food imports, forex demand and current account balances.

“Proactive flood and drought risk assessment, prevention and control measures as well as other potential damage-mitigation measures are being deployed in order to effectively curb the risks of drastic weather changes in the medium term.”

To guard against an unrealistic budget framework, the report explained that revenue projections had been carefully determined, factoring the developments in the international oil market, actual non-oil revenue performances, domestic oil sector developments and reforms.

The Minister of Finance, Mrs. Kemi Adeosun, had stated that the Federal Government would reduce the level of revenue leakages by making the revenue generating agencies more efficient.

She said a circular had been issued on the approved template for the computation of operating surpluses of revenue generating agencies.

She said henceforth, the ministry would not allow any revenue generating agency to incur what she described as “non-allowable expenses in the computation of operating surpluses.”

These non-allowable expenses, according to her, are salary and staff loans in excess of approved scale by National Salaries, Incomes and Wages Commission; monetisation of medical and other allowances; expenditure in excess of approved limit; and donations to individuals, political and charitable organisations.

The minister said the agencies had also been mandated to disclose additional information in their financial statements such as expenses incurred on behalf of supervisory or regulatory agencies.

Others are salaries and allowances paid to board of directors, governing council and commissions outside the approved amount; donations, sponsorships and gifts given or transferred to staff or board members.

She put the total independent revenues generated between January and October 2016 at N272.03bn out of the projected N1.5tn, adding that the government planned to increase this to N811.03bn.

She said as part of the measures to check revenue leakage, a new financing model would also be instituted for universities and hospitals.

This, she noted, would take into consideration their funding model and requirement for better control and improved service delivery.

Adeosun added that a circular on the inclusion of 92 additional corporations, agencies and government owned-companies to the schedule of the Fiscal Responsibility Act had been issued.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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