Pin It
Tuesday 23rd July 2019,
Hope for Nigeria

Lagos fiscal mgt surpasses FG’s as tax tops 75% of revenue BY : PATRICK ATUANYA

oil-industry

The Federal Government may have lessons to learn from Lagos, as the state’s 2012 internally generated revenue (IGR) from taxes touched the 75 percent mark, in stark contrast to the Federal Government which gets only 20 percent of its budget from non-oil taxes and the rest 80 percent from oil earnings.

Lagos State has boosted its IGR from a maximum of N600 million to N7 billion per month from 1999 – 2007, and to N20 billion in the intervening six years, Ben Akabueze, the Lagos State commissioner for economic planning and budget said at the weekend, at the African Bankers Conference on debt capital markets in London.

The ability of Lagos economy to move beyond oil is a template that should be replicated in the rest of the country, according to Razia Khan, regional head of research, Africa, at Standard Chartered Bank.

“Nigeria’s single commodity dependence is a long-running problem, which of course tends to get less focus in good times, compared with bad times,” Khan said in response to questions.

“Our concern is that the amount of spending that Nigeria has seen continues to increase, leaving Nigeria vulnerable to any shortfall in oil earnings, whether that is due to oil theft, or a long-term price decline due to more structural factors.”

The prospect of the end of quantitative easing in the United States has already led a stronger dollar and lower commodity prices.

Brent for August settlement was at $103.03 a barrel Monday, up 87 cents, on the London-based ICE Futures Europe exchange. Brent, which dropped 7.1 percent in the second quarter, may extend its decline because of technical resistance, futures traders say.

Oil revenues account for 80 percent of the 2013 Federal Government budget, 95 percent of dollar earnings and 15 percent of gross domestic product GDP for Nigeria.

“Lagos is well placed to boost its internally generated revenue (IGR) because of its sizeable tax base of businesses,” said FBN Capital analysts in a note released June 28.

Lagos State’s debt is equivalent to 3 percent of its GDP, and 102 percent of its total revenues, while its fiscal deficit is 1 percent of GDP.

The total Federal Government debt is equivalent to 17.9 percent of GDP, 125 percent of 2013 budgeted revenues, while its fiscal deficit may approach 2.17 percent of GDP this year.

“Unsurprisingly, Lagos State has the same credit rating (BB-) as the sovereign, and its bond issuance has been well received by investors,” note FBN Capital.

In the short-term, Nigeria always has the capacity to start borrowing more, according to Khan. In the long-term however, there is no substitute for increasing the amount of revenue mobilisation from non-oil sources, she said.

“Failure to do so would leave the economy highly vulnerable to any external shock. Spending would have to be cut sharply, with a knock-on consequence for growth,” Khan said.

Fiscal indicators such as total federally collected revenues to GDP would also deteriorate from around 29.8 percent in 2011 to 21.2 percent, once the proposed rebasing of GDP is carried out early in 2014, further highlighting the problem of poor tax collection by the Federal Government.

This is lower than the average for sub-Sahara Africa (SSA) and that of the SSA oil-exporting countries, according to Renaissance Capital.

“This implies that pressure on the government to mobilise additional fiscal revenue, particularly beyond the oil & gas sector, is likely to increase following this revision. The government is also likely to be urged to grow its non-tax revenue,” Yvonne Mhango, SSA economist at Renaissance Capital said.

Lagos makes up 20 percent of Nigerian GDP and 40 percent of non-oil GDP.

If you enjoyed this article FEEL Free to TIP Hope for Nigeria Online:


Any Amount Welcome 🙂


Paypal: Paypal.me/hopefornigeria


Do you have story and would like it to be published on Hope for Nigeria? or want to Place Adverts on the Website, If yes email us at moyo@hopefornigeriaonline.com

Like this Article? Share it!

Leave A Response