Nigeria’s much-publicized N6.28 trillion windfall tax and foreign exchange (FX) gains projected for 2024 have yielded nothing as of September, underscoring the dangers of over-optimistic budget assumptions, according to investment bankers.

A report by Cowry Asset Management Limited shows that the ambitious revenue plan outlined in the 2024 federal budget is unraveling. The government had projected N28.77 trillion in revenues for the year, but actual collections stood at only N14.55 trillion by September—far short of the prorated target of N19.41 trillion.

At the centre of the shortfall is oil, Nigeria’s traditional cash cow. Budget assumptions pegged oil revenues at N8.18 trillion for the year, translating to N6.13 trillion by Q3. Actual inflows reached just N4.64 trillion, undershooting the target by 24 per cent. Production bottlenecks, pipeline vandalism, crude theft, and compliance with OPEC+ quotas all weighed heavily on performance.

Non-oil revenues, however, provided some cushion. Collections hit N3.66 trillion by September, surpassing the prorated budget of N2.68 trillion by 37 per cent. Company Income Tax (CIT) delivered N1.93 trillion, well above the N1.10 trillion projection, while Value Added Tax (VAT) receipts rose to N605 billion against N384 billion budgeted, helped by stronger compliance and inflation-driven consumption. Customs duties and independent revenues from government-owned enterprises also exceeded expectations.

Still, the complete failure of the projected N6.28 trillion in windfall taxes and FX gains was a major blow. Analysts warn that such speculative revenue lines only deepen fiscal risks.

“The assumptions behind these projections were overly optimistic. It is a reminder that Nigeria cannot build a sustainable budget on uncertain income streams,” one investment banker noted.

Expenditure trends further exposed the fiscal imbalance. The Federal Government spent N21.87 trillion in the first nine months of 2024, slightly below the prorated N24.34 trillion target but still far in excess of revenues. Recurrent expenditure dominated at N14.65 trillion, almost perfectly on target, while capital expenditure lagged significantly.

Out of a N10.93 trillion target by September, only N5.86 trillion was released for capital projects, representing 54 per cent performance.

Debt servicing emerged as the single largest drain. The government spent N8.93 trillion on debt service in nine months, overshooting the N6.20 trillion target by 44 per cent. Domestic obligations consumed N4.39 trillion, while foreign debt service cost N4.55 trillion. With debt service swallowing over 61 percent of revenues, fiscal flexibility remains constrained.

The financing gap has widened as well. By September, the fiscal deficit hit N7.05 trillion, already above the prorated target of N6.88 trillion. Heavy reliance on the domestic debt market has pushed yields higher, crowding out private sector borrowing. External borrowing remained negligible, with only N1.01 trillion raised against a N1.77 trillion target.

Cowry Asset Management cautioned that without structural reforms—boosting oil output, broadening the non-oil tax base, and curbing recurrent spending—Nigeria risks sinking deeper into a debt trap. “With interest payments swallowing more than 60 per cent of revenues, Nigeria is effectively working for its creditors, not for growth,” the firm stated. (Nigerian Tribune)