Gist: Nigeria Govt makes so much - why do they borrow? here's why?  (Read 1593 times)

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Nigeria Govt makes so much - why do they borrow? here's why?
by flukky01 « on: October 24, 2019, 03:41:21 PM »




At first, I couldn’t be bothered because I was just tired explaining the same thing over and over again to those who either do not read or are not ready to accept a simple fact.

But then I felt it won’t be a bad idea to educate the more!

I have seen COMMENTS on Social Media  like if FIRS generate money this much, why then borrowing to fund the budget!

The sentiment is obvious.

Some, ‘If the FG can earn as high as N15 Trillion, then why do they need to borrow to fund a budget of N9 Trillion’?

I decided to title this #WhereIsTheBalance?

I Hope it gets 1.5k Likes 😎

I will start by asking a question and then proceed to answer the question.

Q: What are the revenue collection agencies of Nigeria?

A: Nigeria has many Revenue Collection Agencies, but the major ones are: FIRS, NCS, DPR, Others (NPA, NIMASSA, JAMB etc). #WhereIsTheBalance?

FIRS - Collects the following taxes on behalf of the Federal Republic of Nigeria. - Company Income Tax (CIT)
- Petroleum Profit Tax (PPT)
- VAT
- Personal Income Tax
- WHT
- Education Tax
- Stamp Duties
- Capital Gains Tax
- NITDF Levy
Nigerian Customs Services
- Custom and Excise Duties.
Department of Petroleum Resources (via the NNPC)
- Royalties on Oil Producing fields
- Rent accruing from awarded concession
- Gas flaring penalties.

*Some in USD proceeds and some in Naira proceeds.

Others:
- NPA
- NIMASA
- JAMB
- Stolen Asset Recovery's
- Dividend
- etc

Q: Where is the revenue collected by these agencies paid into?

A: They are paid into the Federation Account from where a committee known as FAAC meets monthly to divide it among the Federating units in accordance to the revenue sharing formula.

Q: What is the sharing formula used by FAAC?

A: The sharing formula is
- FG: 52.68%
- States: 26.72%
- Local Govt: 20.60%
- There is an additional 13% derivation paid to oil producing states from oil proceeds based on the derivation principle.

Q: Does it mean that all revenue are shared in accordance to that formula?

A: No. The VAT collected by FIRS and paid into the Federation Account is shared with a different formula.
- FG: 15%
- States: 50%
- LG: 35%

Q: How much did the  Federal Republic of Nigeria earn in 2018?

A: I don’t have the full figures, but from public records, we can estimate
FIRS – N5.3 Trillion
NCS - N1.2 Trillion (Prorate from claim of N800B collected as at Aug)
DPR - N7 Trillion
Others - N500B

Q: What is the estimated FG share of this amount?

A: First, let’s back out VAT. We know that out of VAT of N1 Trillion, the FG collects 15% which is = N150 Billion.

Secondly, we need to back out the 13% derivation from oil proceeds as well as other deductions.

Using the basic rule of the THUMB, from an estimated revenue of N14Trillion, we can estimate that revenue available to the FG can't be higher than N6.5Trillion. Even this is generous just reflecting on 2018 budget performance figures.

Q: And the N9 Trillion Budget?

A: The N9 Trillion budget is the budget of the Federal Government of Nigeria and not the Federal Republic of Nigeria. This means that the FG can only budget on its portion of federally collected revenue & not total collect-able revenue.

Since we estimate that the maximum revenue available to the FG would be N6.5 Trillion and the FG intends to spend N9 Trillion, what this means is that the FG will have to spend more than it earns and borrow the difference.

This simply  is what we call budget DEFICIT!

Q: So where is the balance?

A: The balance is with your State Government and Local Government.

Please engage them. Ask them questions.

Challenge them to show you what they're doing with the amount of money they get from FAAC & also from IGR (Internally generated revenue).

I hope with these few points of mine, I've been able to convince and not confuse you about  #WhereIsTheBalance?

Please feel free to bookmark this & share where this misinformation is been peddled.

In the event that someone  should  ask this silly question again, show them this POST

Special thanks to my friend Charles Kay okoye and Mr Fredrick of NBS for there support with relevant information.

JOSEPH ADIMABUA


 

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