Nigeria’s fiscal operation is constrained by poor revenue mobilization despite efforts of the Government. In Q1-19, retained revenue of the government tumbled 28.8%q/q and 9.7% y/y to N798.8bn, no thanks to weaker oil revenue, which continued to fall short of the provisional budget estimate due to the vagaries of oil production and prices.
On the other hand, all non-oil revenue subcomponents underperformed due to lower collection compared to the provisional monthly budget estimate, amid shortfalls in Corporate Tax, VAT, FGN Independent Revenue and Education Tax.
Meanwhile, fiscal deficit has overshot the monthly budgeted benchmark by 142.1% on the average. According to the Debt Management Office (DMO), total debt stock rose 8.7% y/y to N24.0tn as at Dec18. In H1-19, the DMO issued two new bonds, including the debut 30yr Bond (worth N50.0bn in two tranches) and the 2nd tranche of the Green Bond
worth N15.0bn. Alongside the fresh issuances, over N500.0bn worth of debt was raised in the bond market in H1-19 alone, to fund government deficit.
In H2-19, the fiscal operation is expected to remain broadly the same, amid weak revenue framework. As such, the FG’s cost of servicing debt should remain elevated even as non-debt recurrent spending continue to rise due to the new minimum wage implementation. We imagine that efforts to ramp-up non-oil revenue should be sustained to cover up volatile oil revenue.
United Capital Plc Research (UCR)