Economic Confidential, October 2007

MONETARY

CBN Report: FG Records N171.6b Surplus –

Niger Delta Crisis affects Revenue

The government had recorded a surplus of N122.4 billion in 2006, and a deficit of N12.03 billion in the first quarter of 2007. The CBN Economic Report for the second quarter of the year, said the government retained N622.76 billion revenue for the second quarter, against total expenditure of N451.17 billion. This record, even though the total federally-collected revenue dropped by 14.9 per cent in the second quarter of 2007 to N1.094 trillion,  nation’s Gross Domestic Product (GDP) growth rate etched up to 5.73 per cent.

Expenditure dropped by seven per cent from the level in the preceding quarter. Retained revenue was 30.5 per cent higher than estimated; revenue receipts shot up by 31.6 per cent.

"The increase in retained revenue is attributable to the payment of N100 billion due to the Federal Government from the government’s Natural Resources Development Account during the month of May 2007. "The decline in total expenditure for the period, relative to the preceding quarter and budget estimate, was attributable largely to the reductions in personnel costs and the decline in interest payments on domestic debts," the report said.

Revenue collected federally was N1.094 trillion in the second quarter, a decline of 11.2 per cent in the budget, and 10.6 percent from the level in the preceding quarter. Oil receipts accounted for N917.09 billion, declining 3.6 per cent in the budget, and 10 percent from the figure in the first quarter. Oil production, including condensates and natural gas liquids, was estimated at 2.18 million barrels per day (mbd) or 198.38 million barrels, a decline of 2.7 percent from the level in the first quarter. Oil exports totalled 1.73 mbd or 157.43 million barrels, compared with 1.70 mbd in the first quarter of 2007, and 2.42 mbd in the corresponding period last year.

The fall in oil receipts relative to the budget estimate was blamed on the restiveness in the Niger Delta region. Similarly,  non-oil receipts at N177.15 billion or 16.2 per cent of the total, was lower than the receipts in the preceding quarter and  the budget estimate by 14.0 and 36.9 per cent, respectively. The fall in non-oil receipts during the period was attributed to  the decline in Customs & Excise duties and Companies Income Tax (CIT) collections “Of the total federally-collected revenue  during the review quarter, N705.23 billion was transferred to the Federation Account for distribution among the three tiers  of government and the 13 per cent derivation fund. The Federal Government received N330.24 billion, while the state and local  governments received N167.50 billion and N129.14 billion, respectively. The balance of N78.34 billion went to the 13 per cent  derivation fund.

The balance N177.15 billion or 16.2 percent of federally-collected revenue came from value added tax (VAT), customs and excise duties, and companies income tax, among others. The contribution from non-oil sectors was lower than the receipts in the first quarter by 14 percent, and by 36.9 percent in the budget.

"The fall in non-oil receipts during the period was attributable to the decline in customs and excise duties, and companies income tax (CIT) collections."

Of the N1.094 trillion revenue garnered nationally, the CBN said N705.23 billion was transferred to the Federation Account for distribution among the three tiers of government and to take care of the 13 percent derivation fund. The Federal Government received N330.24 billion of the disbursement, states N167.50 billion, and councils N129.14 billion. The 13 percent derivation fund accounted for the balance N78.34 billion. Total receipts by states and councils in the second quarter stood at N279.45 billion, VAT N164.29 billion.