Economy

FG Recorded N2.14tn Fiscal Deficit in 2017 –CBN

Published

7 years ago

April 2, 2018

FG Recorded N2.14tn Fiscal Deficit in 2017 –CBN

The Federal Government recorded a fiscal deficit of N2.14tn in its operations in the 2017 fiscal period, figures obtained from the Central Bank of Nigeria have revealed.

The figures are contained in the fourth quarter Economic Report of the apex bank, which was obtained by our correspondent in Abuja.

A fiscal deficit occurs when a government’s total expenditure exceeds the revenue that it generates, excluding borrowings.

An analysis of the report showed that the fiscal deficit for the 2017 financial year was lower than the N2.19tn recorded in 2016.

The report put the total retained revenue of the Federal Government during the period at N2.76tn, while the expenditure was put at N4.9tn, resulting in overall operational deficit of N2.14tn.

Investigations showed that the deficit was financed through domestic and foreign borrowings, including issuance of government securities.

Further analysis of the report showed that while the Federal Government earned N554.63bn in the first quarter of 2017, it incurred an expenditure of N1.34tn, resulting in a first quarter deficit of N782.96bn after the addition of primary deficit of N158.8bn.

For the second quarter, the sum of N688.69bn was earned by the Federal Government, with an expenditure of N1.17tn, resulting in a deficit of N489.33bn after adding the primary deficit of N185.74bn.

The report put the third quarter revenue of government at N788.56bn, adding that when matched with the N1.4tn expenditure for the period, it resulted into a deficit of N618.66bn.

For the fourth quarter, the government earned N731.61bn as revenue. However, with an expenditure of N979.05bn and a primary surplus of N197bn, the overall deficit for the quarter was put at N247.44bn.

The report read in part, “Provisional Federal Government retained revenue for the fourth quarter of 2017 was estimated at N731.61bn. This was below the proportionate quarterly budget estimate and the receipts in the preceding quarter by 45.8 per cent and 7.2 per cent, respectively.

“Of the total revenue, the Federation Account accounted for 87.2 per cent, while Value Added Tax, Federal Government Independent Revenue and exchange gain accounted for 5.0, 4.5 and 3.3 per cent, respectively.

“The estimated Federal Government expenditure for the fourth quarter of 2017 was N979.05bn. This was below the proportionate quarterly budget estimate of N1.93tn by 49.5 per cent and the level in the preceding quarter by 30.4 per cent.

“A breakdown of the total expenditure showed that the recurrent component accounted for 81.7 per cent, while capital and statutory transfers accounted for 9.6 and 8.7 per cent, respectively.

“A further breakdown of the recurrent expenditure showed that the non-debt component accounted for 44.4 per cent, while debt service payment was 55.6 per cent.”

Speaking on the fiscal deficit, finance and economic experts said the budgetary spending of the government needed to be reduced in a manner that would reflect the rate of revenue inflow.

The Director-General, Institute of Fiscal Studies of Nigeria, Mr. Godwin Ighedosa, said, “We have so much relied on oil revenue in the last 45 years and with the decline in oil revenue, the time has come now for us to review our fiscal position.

“There is a need for a reform of the country’s tax administration system to enable the Federal Government to raise more revenue from Capital Gains Tax. Our tax to Gross Domestic Product ratio is one of the lowest in the world and we need to address that.”

In his comment, the Head of Banking and Finance Department, Nasarawa State University, Dr. Uche Uwaleke, said there was a need for the National Assembly to come up with legislation to improve the level of coordination between fiscal and monetary policy authorities.

He said the law would enable both authorities to effectively come up with the right policy mix in addressing the fiscal challenges facing the economy.

He argued that the failure to properly coordinate both fiscal and monetary policies was having negative influences on the economy through deficit financing.

Uwaleke added that a weak policy stance in one area could burden the other area and would make the economy to suffer in the long run.

He said, “The need for policy coordination arises in the case of structural reforms and liberalisation of the financial sector. Such reforms can only proceed within the framework of a supportive fiscal policy that provides macroeconomic stability, fiscal discipline and avoidance of taxes that discriminate against financial activity.

“If high fiscal deficit persist while the authorities are undertaking the reforms of the financial sector, interest rates could reach very high levels or if interest rates are kept at artificially low levels, either inflation will surge or the demand for credit and distortions in resource allocations will grow significantly.”

Uwaleke added, “The constitution empowers the legislature with three basic functions of representation, law-making and oversight.

“To this end, the National Assembly can facilitate synergy between monetary and fiscal policies towards economic diversification by making laws designed to put an end to budget delays and fiscal deficit.”

The Registrar, Chartered Institute of Finance and Control of Nigeria, Mr. Godwin Eohoi, said the deficit nature of the Federal Government’s budget was responsible for increase in government borrowing.

He stated, “It is expected that the debt profile of a country will rise considering the fact that we have a deficit budget and even the deficit side of the budget was not effectively met in the last budget year.

“We have a high fiscal deficit, which can only be funded through borrowing.

“When you borrow for investment, it improves the position on your balance sheet and when you borrow for consumption, it can cause problems for the economy as it will affect the level of confidence in the economy from investors, because they will assume we can’t manage our economy.”

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Economy

House of Reps Warns Tinubu Against Multiple Tax Burdens on Nigerians

Published

24 hours ago

October 12, 2024

Bassey Marshall

Company Income Tax (CIT) - Investors King

The House of Representatives has warned President Bola Tinubu against imposing multiple taxes, levies, and charges on Nigerians already struggling with subsidy removal and higher electricity bills.

During Thursday’s plenary session, the member representing Anambra East/Anambra West Federal Constituency, Mr. Peter Aniekwe, called for the adoption of a motion on urgent public importance.

Investors King reported that the motion was co-sponsored by the House Minority Leader, Rep. Kingsley Chinda, and four others.

In defense of the motion, Aniekwe noted that the government’s introduction of additional taxes, which he described as sometimes unnecessary, only adds an undue burden on Nigerians.

He emphasized the need for the government to strike a balance when imposing taxes that are essential for revenue generation.

Aniekwe said, “The imposition of multiple taxes, levies, and charges at various levels of government only serves to exacerbate the financial strain on citizens, particularly those in low-income brackets, many of whom are already struggling to meet basic needs such as food, healthcare, housing, and education.

“The introduction of additional and sometimes unnecessary taxes, including consumption taxes, service taxes, and levies on essential goods and services, places an undue burden on the masses, further widening the inequality gap.

“While taxation is necessary for government revenue, a balance must be struck between revenue generation and the economic well-being of citizens, particularly at a time when many families and businesses are still recovering from the economic impact of global and local challenges.

“The government’s primary responsibility is to alleviate the economic challenges faced by the masses, ensuring policies that promote economic development, social welfare, and prosperity for all citizens.”

After Aniekwe’s defense, the House of Representatives adopted the motion.

The House cautioned the Federal Government against multiple taxation and mandated the committees on Finance and FIRS to, within three weeks, conduct a thorough review of existing tax laws and policies to streamline tax collection processes and eliminate redundant or overlapping taxes.

The committee was also tasked with identifying areas of double taxation at all levels for necessary action.

Economy

Boosting Nigeria’s Digital Future: STEM Education and AI Could Add $15 Billion to Economy by 2030

Published

1 week ago

October 4, 2024

Ugwoke Ogbodo

If Nigeria can enhance its Science, Technology, Engineering, and Math (STEM) education and prepare its workforce for future opportunities in the digital space, the economy could expand by an additional $15 billion, a new report has revealed.

The report, issued by consultancy Public First on Thursday, also indicated that Nigeria reaped an estimated $1.8 billion in economic benefits from Google’s tools and services in 2023.

Presenting the report in Lagos State, the Nigeria Digital Opportunity study highlighted the financial value contributed to the nation’s economy through services such as Google Search, Ads, Google Play, YouTube, and Google Cloud.

These services have played a significant role in boosting the productivity of Nigerian businesses, content creators, and workers.

It is no secret that a large number of young Nigerians have become tech-savvy, with many venturing into the thriving world of technology and content creation on social media platforms.

According to Google, its digital skills programs and career certificates are key drivers of Nigeria’s digital transformation, with over 1.5 million young Nigerians acquiring new digital skills in 2023.

Google’s Director for West Africa, Olumide Balogun, expressed the company’s satisfaction with the positive impact that digital technology is having on Nigeria’s economy.

He emphasized that the findings highlight the importance of continued investment in digital skills and infrastructure to unlock the full potential of Nigeria’s growing digital economy.

Balogun noted that with rapid digital advancements, particularly in areas such as cloud computing, connectivity, and artificial intelligence (AI), Nigeria is well-positioned to solidify its standing as a leading digital economy in Africa.

He advised the country to strengthen its technology policies, stating that Nigeria’s economic future will largely depend on its ability to harness technology. Balogun added that Google remains committed to supporting Nigeria’s journey through strategic investments and partnerships.

The report underscored the significant role digital technology plays in Nigeria’s economy, with Balogun noting that for every $1 invested in digital technology, the country generates over $8 in economic value.

Meanwhile, Google has called on Nigerian policymakers to prioritize STEM education to maximize the economic benefits of technology.

The report also projected that AI could contribute $15 billion to Nigeria’s economy by 2030.

Balogun highlighted Google’s efforts in promoting responsible AI development, noting that in 2021, the company committed $1 billion to support Africa’s digital economy.

He added that this initiative included the 2022 landing of the Equiano fiber-optic cable in Nigeria, which is expected to boost internet penetration by seven percent by 2025, significantly enhancing internet access and reliability.

Google also recommended that Nigerian policymakers adopt cloud-first strategies and strengthen the country’s digital infrastructure to harness the full potential of AI, while emphasizing the need for improved STEM education to prepare the workforce for future opportunities.

Amy Price, Director and Head of Technology Policy at Public First, praised Nigeria as a digital leader in Africa. She emphasized that tech investment will serve as a catalyst for further growth and development across the nation.

Price further highlighted the critical role AI will play in shaping Nigeria’s future economy, with the report estimating that AI could add $15 billion to the country’s GDP by 2030. She stressed that the nation must focus on building strong digital infrastructure and investing in STEM education to prepare its workforce for the jobs of tomorrow.

Economy

Lawmakers to Deliberate on Nigerian Tax Reform Bills, Change of FIRS to NIRS

Published

1 week ago

October 4, 2024

Iyanuoluwa Martins

The National Assembly is set to begin deliberations after receiving President Bola Tinubu’s communication seeking consideration and passage of the proposed Fiscal Policy and Tax Reform Bill to align with ongoing financial reforms of the Federal Government and enhance efficiency in tax compliance.

In addition to the Senate, the House of Representatives received four bills forwarded by the President. They include the Nigeria Tax Bill, the Nigeria Tax Administration Bill, the Nigeria Revenue Establishment Bill and the Joint Revenue Board Establishment Bill.

The Nigeria Revenue Service (Establishment) Bill seeks to repeal the Federal Inland Revenue Service (Establishment) Act, No. 13, 2007, and establishes the Nigeria Revenue Service, to assess, collect, and account for revenue accruable to the government of the federation.

The Transmission of Fiscal Policy and Tax Reform Bills to the National Assembly is The Nigeria Tax Bill, which seeks to provide a consolidated fiscal framework for taxation in Nigeria.

The Nigeria Tax Administration Bill seeks to provide a clear and concise legal framework for the fair, consistent and efficient administration of all the tax laws to facilitate ease of tax compliance, reduce tax disputes and optimize revenue.

Meanwhile, the Joint Revenue Board (Establishment) Bill aims to establish the Joint Revenue Board, the Tax Appeal Tribunal and the Office of the Tax Ombudsman for the harmonization, coordination and settlement of disputes arising from revenue administration in Nigeria.

This comes after President Tinubu during his speech on Nigeria’s 64th Independence Anniversary on Tuesday (October 1) said some Economic Stabilisation Bills would be transmitted to the National Assembly.

“We are moving ahead with our fiscal policy reforms. To stimulate our productive capacity and create more jobs and prosperity, the Federal Executive Council approved the Economic Stabilisation Bills, which will now be transmitted to the National Assembly.

“These transformative bills will make our business environment more friendly, stimulate investment and reduce the tax burden on businesses and workers once they are passed into law,” he said.

Recently, the Chairman of the Presidential Taskforce on Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, said the Withholding Tax Regulations 2024 has been gazetted.

“I do have some good news, the good news is that the withholding tax regulation has now been gazetted. So, the only reason it hasn’t been published today is because it is public holiday, so first thing tomorrow you will see a copy of the gazette and that provides a lot of relief not just for manufacturers but also every other business in terms of taking away some of the burdens of funding their working capital,” Mr Oyedele said.

Nigeria has been seeking to harmonise its tax base as it has a tax-to-gross domestic product (GDP) ratio of 10.8 percent; comparatively, the average tax-to-GDP ratio for Africa is about 18 percent.