Lagos, Nigeria: Nigeria’s budget deficit for 2016 which is projected at 3 percent of GDP or N3 trillion may widen further as a slump in imports due to collapsing oil prices and a slowing economy hits customs duties and taxes.
Even though oil share of Nigeria’s economy is small at about 10 percent, the commodity still has an outsized impact on economic activity from its ability to slow down other sectors such as trade and imports.
Kayode Farinto, national publicity secretary of the Association of Nigeria Licensed Customs Agents (ANLCA), states that the N1 trillion 2016 revenue target set by the Hameed Ali (rtd)-led administration cannot be achieved in the face of the falling Naira, scarcity of foreign currency and restriction of access to foreign exchange on imports by the Central Bank of Nigeria (CBN).
“Many importers are currently finding it difficult to open form ‘M’ in commercial banks due to CBN restrictions. If an importer goes to the bank to source for foreign exchange, the tendency is that the person may not be able to get it or there would be a limit to the amount an importer can get at a particular point in time, and all these policies are counterproductive,” Farinto explained.
The Federal Government has projected non oil revenues of N1.45 trillion for 2016 which is to come mainly from company income tax, VAT, customs and excise duties.
This may be overly optimistic in an economy growing way below potential, as can be seen from the lower year on year profits of most listed firms and much lower import and export volumes.
“It is clear that better compliance will play some role in helping to improve the amount of non-oil revenue that is collected. All the same, a second consecutive year of weak economic growth may pose some risk to the non-oil revenue assumption,” Razia Khan, Chief economist for Africa at Standard Chartered Bank, London, said in response to questions.
Sources say terminals that have the capacity to handle three to four vessels simultaneously now handle one or two vessels in one week.
Nigeria’s 2016 budget proposes to spend N6.07 trillion in total with N2.64 trillion allocated for recurrent non-debt expenditure, N1.84 trillion for capital expenditure, and N1.47 trillion on debt service.
The budget has an embedded deficit of N2.2 trillion to be funded mainly from domestic and external borrowings.