It was yet another weekend filled with activities and major highlights; from the trending Squid Game series on Netflix that took social media by storm and has led to various companies and individuals creating content around the Squid Game, to the amazing boxing trilogy between Tyson Fury the gypsy king, and Deontay Wilder.
I thought Deontay Wilder had it in the bag after knocking down Tyson Fury twice, but I guess it’s true what they say, “it is not over until it is over.” Before we scrutinize the budget presentation by President Muhammadu Buhari to the National Assembly last week, here is an excerpt from the comments of one of our Co-Managing Partners at Comercio Partners on the memorable boxing match.
“The Classic Trilogy Bout!!!
This was a fight that lived up to the expectation of a typical heavyweight bout and arguably the best I have seen in a long while.
Don’t let us dwell on the euphoria of the match but mostly on the lessons learnt from this bout and takebacks as leaders of business and how that same mentality can impact our day-to-day decisions and strategies in life. These are some of my points:
Being Confident: Despite all the trash talks and the pre-match banters from Wilder, Fury’s focus was firm and confident, unshakeable.
Discipline: Leaders need to be aware of the task ahead and put certain checks in place to keep them focused on the mission.
Teamwork and Mentorship/Coaching: Here, T.F shouted out the name of his coach, Sugarhill Steward! Who are yours or who is in your corner?
Recovery Rate & Being in Control: Knocked down twice in the 4th round but never gave up the fight. We operate in a very competitive world and often face the toughest challenges and pitfalls but the manner we rise to those challenges and take control of the situation will determine how far we go.
God Factor: A place of prayer in our strategy and business in life cannot be ignored as all power and knowledge belongs to God.” – Steve Osho
Red Light, Red Light…
Player 001 in Squid Game
We finally got a hint of the budget performance for 2021 as well as the budget for 2022 last Thursday, as President Muhammadu Buhari proposed a total budget of N16.39 trillion for the year 2022 to the National Assembly. But as always, we are left with the same question as previous years, “How is this achievable considering the underperformance of the previous budgets?”
Nevertheless, we got a glimpse of hope on the performance front of the 2021 Budget, as we witnessed an impressive performance from the non-oil tax revenue, which recorded a performance of 115.7% of January to August target (N1.15tn actual as against N0.99trn Prorata), signaling the potential of the non-oil sector if more attention was skewed towards the sector.
Budget Performance Snapshots (2016 -2021)
Source: Budget office, Comercio Partners
Source: Budget office, Comercio Partners
A further breakdown shows that the FGN share of oil revenues was N754.2 billion, representing 56.3% performance of the prorated (Jan – Aug) sum in the 2021 budget, as the cut in oil production quota under its OPEC+ affiliation has significantly put constraints on Nigeria’s oil revenue despite the sustained rise in crude prices. On the other hand, we saw a somewhat positive development in the non-oil revenue, which recorded N1.15 billion revenues (115.7% over and above the target). This was largely driven by Companies Income Tax (CIT) and Value Added Tax (VAT) collections. Companies Income Tax (CIT) and Value Added Tax (VAT) collections were N547.54 billion and N235.77 billion, representing 121% and 148% respectively of the prorated (Jan – Aug) targets for the period.
Source: Budget office, Comercio Partners
Source: Budget office, Comercio Partners
On the expenditure side, N8.14 trillion (or 84%) has been spent out of the N9.71 trillion prorata budget. This performance is inclusive of expenditure estimates of the GOEs but exclusive of Project-tied Loans. As of August 2021, N1.759 trillion had been expended for capital, while N2.87 trillion and N2.57 trillion was spent on debt service and personnel cost respectively.
Source: Budget office, Comercio Partners
The fiscal deficit exceeded its prorated budget by 107%, recording a fiscal deficit of N4.6 trillion as against N4.2 trillion of the prorated (Jan – Aug) target for the period. The fiscal deficit has exceeded its budgeted target by an average of 53% over the past 5-years, and given the revenue performance of 73%, we expect further pressure on both the domestic and foreign front in Q4 2021 as the federal government looks to reduce the funding gap.
Carving an umbrella or meeting the 2022 Budget……which has a better odd of success?
Squid Game
Key Assumption of FGN 2022 Budget
| Oil Price Benchmark (US$/b) | 57 |
| Oil Production (mbpd) | 1.88 |
| Exchange Rate (N/$) | 410.15 |
| Inflation (%) | 13 |
| GDP Growth Rate (%) | 4.2 |
Source: Budget office, Comercio Partners
Given the sustained recovery in economic activity due to the reopening, we expect the non-oil revenue to maintain its stable performance, with company income tax and VAT being a major driver in 2022. Nevertheless, accommodative policies and an increase in capital spending could be crucial in the long-term trajectory of the non-oil sector.
On Crude oil, we expect oil revenue to remain depressed as OPEC output constraints coupled with structural issues continue to dampen revenue. However, the implementation of the PIB will be a major determinant in the performance of the non-oil sector in 2021.
