By Adedapo Adesanya
There is an urgent need for the Nigerian government to sustain its effort in consolidating non-oil revenue as the country’s dependence on its major source of revenue is telling on its economic development.
This is the opinion of analysts at United Capital Research, who said in a report this week that the performance of a weaker oil revenue was taking its toll on other macroeconomic tendencies due to the recent depletion in global prices of oil.
“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,” the report stated.
Accordingly, the report indicated that all non-oil revenue is underperforming as a result of lower collection compared to the provisional monthly budget estimate, amid shortfalls in Corporate Tax, VAT, FGN Independent Revenue and Education Tax.
As recorded earlier in the first quarter (Q1) of 2019, the country’s retained revenue of the government tumbled 28.8 percent quarter-on-quarter and 9.7 percent year-on-year to N798.8 billion as a result of frail oil revenue which has since continued to tumble due to the vagaries of oil production and prices.
More recently, Brent crude, against which Nigeria’s oil is priced imposed a serious threat to Nigeria’s economy as it breached the 2019 budget benchmark price of $60 per barrel, throwing up further concern around the government’s ability to meet its revenue target.
On the associated risk that this poses to the exchange rate, the report highlights, “We do not see any near-term risks to the exchange rate with the CBN reserves currently at a comfortable level of $45 billion – above 12 months import cover.”
Considering what is to come in the nearest future regarding oil prices, “Our projection for oil prices is maintained at $60-$70/ b as geopolitical issues continue to drive prices,” it concluded.
The oil market continues to trade lower on concerns about demand growth and the idea that economic growth can be impacted by the trade war between the world’s two largest economies, U.S and China.
Dipo Olowookere