Nigeria’s dependence on oil might be loosening its grip, with non-oil revenue soaring a remarkable 67% to nearly N4 trillion in the third quarter of 2023 compared to the previous quarter, according to the Central Bank of Nigeria’s (CBN) report. This surge propelled the overall federal government revenue up by 50.1%.
The CBN, in its third quarter economic report, noted that the revenue increased to N4.79tn from the prior quarter because of higher non-oil receipts but fell below the budget benchmark by 9.5 per cent.
“At N4,791.39bn, Federation Account receipt exceeded the level in Q22023 by 50.1 per cent but was below the benchmark by 9.5 per cent,” the report read.
While this is undoubtedly positive news, a closer look reveals a mixed picture. Despite the impressive non-oil performance, the total revenue still fell short of the budgeted target by 9.5%. This raises questions about the sustainability of the non-oil revenue growth and the government’s ability to meet its financial obligations.
The CBN read in part, “Non-oil revenue continued to dominate federation revenue, accounting for 83.0 per cent, while oil revenue made up the balance of 17.0 per cent. Driven by receipts from production sharing contracts and dividends from NNPCL, oil revenue, at N814.23 billion, rose by 0.6 per cent above the level in the preceding quarter, but was below the target of N2,410.89 billion by 66.2 per cent.”
“Non-oil revenue, at N3,977.16 billion, was 66.9 per cent above the level in the preceding quarter and exceeded the target by 38.0 per cent, reflecting higher collections of CIT, Custom & Excise Duties, and VAT. The increase in receipts was driven by improved economic activities, seasonality in tax returns, particularly CIT; and improved efficiency in tax administration.”
Non-Oil Takes the Lead:
The report attributes the impressive non-oil revenue rise to various factors, including increased Value Added Tax (VAT) collections, improved customs duties, and higher company income tax receipts. This suggests a diversification of the revenue base, which is crucial for long-term economic stability.
But Is It Enough?
However, despite the non-oil boost, the overall revenue falling below the budget benchmark is a cause for concern. This shortfall could affect critical government spending on infrastructure, social services, and debt repayment.
Looking Ahead:
The question remains: can the non-oil sector continue its upward trajectory and compensate for any potential dip in oil revenue? Sustaining this growth will require continued efforts to broaden the tax base, improve tax collection efficiency, and diversify the economy beyond oil.
The CBN report offers a glimpse of hope, but the journey towards a truly oil-independent Nigeria is far from over. Close monitoring of revenue generation, diversification efforts, and responsible budget management will be crucial in unlocking the full potential of this emerging trend.
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