Business Feature

Rising tax revenue: Crude still 95% of Nigeria’s exports, say Experts

Though Nigeria has been recording increasing tax revenues recently, PAUL OGBUOKIRI reports that oil/ gas export is still 95 per cent of Nigeria’s exports; indicating that the country remains a mono-cultural economy, according to experts


Non-oil exports: FG pledges improved funding for exporters


Amidst the dwindling fortunes of the oil and gas sector exacerbated by the impact of COVID-19 pandemic, experts have said that despite the statement credited to the Vice President, Prof. Yemi Osinbajo’s last week Thursday that majority of the revenue flowing into the nation’s treasury is generated from non-oil exports, crude oil still accounts for over 95 per cent of the country’s export earnings.


They expressed concerns over Nigeria’s poor records in exportation of manufactured and value added products, stressing that such developments pose grave danger to its balance of trade and payment positions.


Speaking at an export facilitation workshop organised by the Association of Business Editors in Nigeria (ABEN) themed; Strengthening Economic Recovery in a Pandemic Through Aggressive Non-oil Export Drive: Prospects and Challenges in Lagos, recently, Professor of Economic and Public Policy, University of Uyo, Akwa Ibom State, Akpan Hogan Ekpo, stated that while the Nigerian economy remains diversified, its external sector is still dominated by oil and gas trading which accounts for over 90 per cent of foreign exchange earnings.


He explained that Nigeria recorded a trade deficit of N7.38 trillion in 2020, compared to a surplus of N2.23 trillion in 2019, reflecting the confluence of 17.32 per cent increase in import and a 34.75 per cent decline in export during the period. Ekpo recalled that the nation’s total trade declined by 10.32 per cent in 2020, as crude oil export shrank by 35.71 per cent to N9.44 trillion in 2020, while the non-oil export also declined by 32 per cent, reflecting the colossal collapse of economic activities during the period of the pandemic in 2020.


He said that agricultural commodities equally recorded price declines, owing to COVID-19 related factors that affected several sectors of the economy. He, however, blamed low productivity, sub-standard packaging, inadequate facilities, dearth of technical-know-how on product development for the continued limitation of Nigeria’s non-oil sector on the global market space.


On what the export development bank did to ease the impact of the pandemic on its stakeholders during the pandemic, Ekpo listed the reduction of interest rate on its loans from 9 to 5 per cent, extending moratorium on loans to exporters and helping exporters to markets that were less impacted by the pandemic as well as developing risk mitigation instruments such as Export Credit Insurance and Investment Guarantees in addition to introducing Special Intervention Schemes to exporters in the market.


Also, speaking, Head of Strategic Planning at NEXIM Bank, Mr. Olutayo Omidiji, who represented the Managing Director of the bank, Mr. Abubakar Bello said: “What we should expect from NEXIM is increase in taxation because what we are doing right now is to grow our funds to be able to intervene more aggressively in the export sector.


For anything, what we need right now is to further diversify the economy. “So, if we diversify the external sector, it will increase the number of commodities in our export basket and even increase the number of buyer countries where our  exporters can export too and I think that would also help in our efforts to further boost revenue from the non-oil sector.”


He assured Nigerians that NEXIM will continue to work with other governmental agencies to implement initiatives aimed at mitigating the impact of the pandemic on the non-oil export sector. In his presentation, the Director General, Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf, called on the Federal Government to improve the operating environment for a competitive non-oil sector as such clearly does not exist at the moment, particularly by allowing exporters free access to their funds.

Yusuf observed that it was becoming difficult dissecting the performance of the non -oil sector from the general performance in the real economy with the challenge of competitiveness being a major constraint.


FG suffers N5.8trn revenue shortfall from non-oil exports


Within a three-year period covering December 2017 to December 2020, Nigeria generated a total sum of N6.5 trillion from non-oil exports, data from the National Bureau of Statistics have shown.


This sum is N5.8 trillion lower than its N12.3 trillion ($30 billion) target set by the Federal Government under its zero-oil plan. In the fourth quarter of 2016, the Nigerian Export Promotion Council (NEPC) conceived the Zero Oil Plan (a core component of the Federal Government’s Economic Recovery and Growth Plan) to increase the contribution of non-oil exports to Nigeria’s Gross Domestic Product by 20 per cent.


According to the NEPC’s 2016 annual report, the focus of the plan is to ‘generate at least, a minimum of 40 – 50 per cent of Nigeria earnings from non-oil export’. Among other things, the report disclosed that the plan was expected to grow non-oil foreign exchange to $30 billion by 2020.



The $30 billion was to be generated from 11 strategic export products – such as petrochemicals, palm oil, cocoa, soybeans, rubber– with high financial value to replace oil. The $30 billion target, when converted to naira, using the current official exchange rate of N411/$ equals N12.3 trillion.


The report read:“The Nigerian Export Promotion Council launched the Zero Oil Plan, a medium and long term strategy aimed at diversifying the economy from oil. The Zero Oil Plan has become a key component of the Economic Recovery and Growth Plan.


“The focus is to generate at least, a minimum of 40–50 per cent of Nigeria earnings from non-oil exports. The plan was presented to different states, development partners and donor agencies and has been widely accepted. “The overall targets set for the zero oil plan include: to grow non-oil foreign exchange from $2.7 billion base to $30 billion by 2020.”


According to Professor Gideon Goshit, Head, Department of Economics, University of Jos, the NEPC’s zero oil plan has largely been unrealized despite the sloganeering of diversification by the Federal Government. “Nigeria has not done well in terms of nonoil exports.


We should not mistake rising non-oil revenue for rising non-oil exports. Non- oil revenues coming from tax have been rising, not non-oil exports. To me, there is nothing to celebrate because Nigerians are paying the tax the government is celebrating under a very difficult situation.”


It would be recalled that significant growth in non-oil tax receipts in April, prompted by the gradual return of business activities to pre-COVID-19 levels, led to a 28.2 per cent increase in the Federal Government’s revenue, relative to the preceding month, raising the government’s revenue to N1.106 trillion, the Central Bank of Nigeria (CBN) revealed.


The CBN stated this in its monthly economic report for April posted on its website.

According to the report, at N1.106 trillion, the federation receipt in April 2021 outpaced both the budget benchmark and collections in March 2021 by 28.2 per cent and 7.9 per cent, respectively. While oil revenue accounted for 35.5 per cent (or N392.91 billion) of total receipts in the period, non-oil revenue contributed 64.5 per cent (or N712.87 billion).


The report attributed the diminished share of oil to the meagre remittance of N3.79 billion from crude oil and gas exports, compared with N52.50 billion in the 2021 budget estimate.


This reflected the exacerbating incidence of cost ‘under-recovery,’ as reported by the Nigerian National Petroleum Corporation (NNPC), it stated. The report said: “In addition, the significant decline in domestic crude oil and gas sales also contributed to the meagre oil receipt during the period. The strong performance of non-oil revenue in April 2021 reflected the maturing benefits of the Strategic Revenue Generation Initiative (SRGI) of the Federal Government, as contained in the 2019 and 2020 Finance Acts.


“The contribution of non-oil revenue was driven, majorly, by higher earnings from Corporate Income Tax (CIT) and Value Added Tax (VAT).” Meanwhile, a breakdown of non-oil exports during the review period showed that in 2017, non-oil exports contributed N629.9 billion or 4.6 per cent of the total export of N13.6 trillion.


Out of the total export of N18.5 trillion recorded in 2018, only N1.9 trillion was gener ated from the export of non-oil products. In 2019, non-oil exports accounted for N2.5 trillion of the total export of N19.2 trillion recorded at the end of the year.


For 2020, Nigeria generated N1.4 trillion from non-oil exports, which constituted only 11.4 per cent of its N12.5 trillion worth of export.


Non-oil exports N463bn, crude N4.08trn in Q2, 2021


The nation’s non-oil export in the second quarter of 2021 has risen to N462.85 billion according to data from the National Bureau of Statistic (NBS). The data also indicates that Nigeria recorded a N1.87 trillion deficit in trade at the end of the same quarter. The figure showed that Nigeria’s total trade stood at N12.03 trillion with total imports for the quarter under review valued at N6.95 trillion and exports valued at N5.08 trillion respectively.


Crude oil exports amounted to N4.08 trillion while non-crude oil exports amounted to N1 trillion and non-oil exports amounting to a mere N462.85 billion. However, the figure for the Q2 2021 is about N3 trillion higher than the first quarter, which had N9.76 trillion, representing 23.28 per cent and 88.71 per cent higher than the corresponding quarter in 2020 with N6.37 trillion.


The statistics revealed that China, India and Netherlands topped the list of countries of import to Nigeria. The total imports from China stand at 29.91 per cent with a Gross Domestic Product (GDP) rate of 7.9 per cent, followed by India with 8.20 per cent imports and GDP rate of 20.1 per cent and Netherlands with 8.02 per cent imports with GDP rate of 9.7 per cent and United States with 7.58 per cent imports with GDP rate of 12.2 per cent and Russia 4.09 per cent imports and GDP rate of 10.3 per cent. It shows that most of Nigeria’s imports came in from Asia with percentage value of 49.92 per cent, followed by Europe with 33.16 per cent and America, Africa and Oceania following suit with import ratio of 12.50 per cent, 3.58 per cent and 0.84 per cent respectively.


Non-oil revenues rising above oil revenues


In the period under review, VAT collections stood at N235.77 billion, which is N76.8 billion higher than N158.95 billion prorated revenue target for the period under review. Recall that the Federal Government budgeted a sum of N238.43 billion as VAT revenue for the 2021 fiscal year. However, in just 8 months into the year, 98.9 per cent of the target for the year has already been met.


VAT has been a thorny issue in recent weeks as the Federal Government faces a legal tussle with powerful states who insist they should keep all the VAT collected from their states, rather than continue with the Federal Government’s revenue sharing formula.


Similarly, in terms of company income taxes, a sum of N547.54 billion was generated in the same period, which is 20.5 per cent above prorated figures and representing 80.3 per cent achievement rate compared to an annual budget of N681.72 billion.


Oil revenues, which has for years contributed the most to government revenues, is currently lagging behind non-oil revenues, averaging 61 per cent over the last decade, based on data compiled by Nairalytics. According to the Minister of Finance, oil revenue for the period under review is N754.16 billion and was below target.

Thus, so far in the year 2021 oil revenue has only managed to account for 19.2 per cent of the total federally collected revenue hugely underperforming by 43.7 per cent.




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