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. Additionally, all non-oil revenue sub-components underperformed due to lower collection compared to the provisional monthly budget estimate, amid shortfalls in Corporate Tax, VAT, FGN Independent Revenue and Education Tax.
More recently, the Nigerian crude oil benchmark, Brent, breached the 2019 budget benchmark price of $60/b, throwing up further concern around the government’s ability to meet his revenue target. The recent decline was on the back of renewed concern of a trade war between the world’s two largest economies, U.S and China, which is expected to hamper the overall global demand.
In our opinion, the panic that trailed the decline in oil prices continues to signify the fragility of the country’s revenue sources and calls for the need to sustain efforts to consolidate non-oil revenue. Additionally, we do not see any near-term risks to the exchange rate with the CBN reserves currently at a comfortable level of $45bn – above 12months import cover. Our projection for oil prices is maintained at $60-$70/ b as geopolitical issues continue to drive prices.
United Capital Plc Research
