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Sugar tax now on all non-alcoholic, carbonated beverages

•Plans fuel subsidy removal for second half of 2022

•Restates readiness to conduct a national census

•FIRS generated N6.4trn in 2021

•Independent revenue collections surpassed N1trn last year

The federal government yesterday disclosed that henceforth it would charge offshore companies providing digital services to local customers in Nigeria a six per cent tax on turnover as provided in the 2021 Finance Act.

The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, disclosed this during the public presentation and breakdown of the 2022 budget held in Abuja.

Also, Ahmed disclosed that as of November 2021, the government had surpassed all collections for its independent revenues from 2017 to date, which according to her reflected the performance of the government’s revenue growth initiatives.


“We have now for the first time surpassed the 1 trillion mark collection for independent revenues (N1.104tn) collected as at November against a budget target of 973.41bn). Analysts have always considered our projections unrealistic, but we have always insisted on the potentials that exist to grow FGN independent revenues,” she revealed.

Speaking further on the tax on digital services, she explained that it includes apps, high-frequency trading, electronic data storage and online advertising, adding that, “this is introducing a turnover tax on a fair and reasonable basis.”

The new policy is contained in Section 30 of the Finance Act which amended the provisions of Section 10, 31 and 14 on VAT obligations for non-resident digital companies.

Ahmed said, “Section 30 of the Finance Act designed to amend section 10, 31 and 14 of VAT is in relations to VAT obligations for non-resident digital companies and the mechanism that will be used is to restrict VAT obligations mainly to digital non-resident companies who supply individuals in Nigeria who can’t themselves self-account for VAT.

“So if you visit Amazon, we are expecting Amazon to add VAT charge to whatever transaction you are paying for. I am using Amazon as an example. We are going to be working with Amazon to be registered as a tax agent for the FIRS.

“So Amazon will now collect this payment and remit to FIRS and this is in line with global best practices, we have been missing out on this stream of revenue.


According to her, the new law applies to foreign companies that provide digital services such as apps, high-frequency trading, electronic data storage, online and advertising, among others.

She noted that in line with Section 4 of the Finance Act, non-resident companies are now expected to pay tax at six per cent on their turnover.


The minister who stated that the government was desirous of modernising taxes for its digital economy and to improve compliance, noted that digital non-resident companies do not need to be registered locally but would have an arrangement with the Federal Inland Revenue Services(FIRS) to collect and remit taxes in a bid to reduce the compliance burden.

She also disclosed that the federal government has introduced an excise duty of N10 per litre on all non-alcoholic, carbonated and sweetened beverages in the country.

Lennox Mall

The minister stated that the charge on beverages was also a new policy introduced in the Finance Act which was signed into law by President Muhammadu Buhari on December 31, 2021, alongside the 2022 Appropriation Bill.

The minister pointed out that the new sugar tax was introduced to raise excise duties and revenues for health-related and other critical expenditures in line with the 2022 budget priorities.


The aimed according to her, was to also discourage excessive consumption of sugar in beverages, which contributed to diabetes, obesity and other diseases adding that the Finance Act had also raised excise duties and revenues for the health sector.

She also said that a provision had been made under the Act to reinforce the FIRS mandate as the principal tax collection agency while collaborating with other law enforcement Ministries, Departments and Agencies (MDAs).


Speaking further, Ahmed expressed the preparedness of the federal government to conduct the national population and housing census, which was last held in Nigeria over 15 years ago.

Ahmed had in November last year disclosed that the sum of N178.09 billion had been approved for the national population census in the 2022 budget.

The minister disclosed that necessary budgetary allocation had been made and every machinery put in motion to conduct the exercise, adding that it was left for the National Population Commission (NPC) to draw up a timetable.

Ahmed also revealed that Nigeria’s independent revenue surpassed the N1 trillion mark in 2021, due to the implementation of the 2020 Finance Act.


On fuel subsidy, the minister said as provided by the Petroleum Industry Act, all petroleum products must be deregulated.

Flowing from this, she said subsidy was provided for subsidy up to June after which full deregulation comes on stream.

The minister stated that subsidy was provided up to June to allow ongoing consultations with various stakeholders, including organised labour to be concluded

On how to mitigate the impact of the subsidy removal, Zainab said a committee set up by government to work out measures that would cushion the effect on Nigerians, especially the vulnerable ones would make recommendations on the way out.

President Muhammadu Buhari had signed the 2022 Appropriation Bill of N17.13 trillion into law on December 31, 2021, having laid the proposal before the National Assembly on October 7, 2021.

The president had also signed the 2021 finance bill into law on same day.

The two chambers had increased the spending plan by N735.8 billion from the proposed N16.391tn to N17.126 trillion. They had also raised the oil benchmark from $57 per barrel proposed by the executive to $62.

The National Assembly had also fixed oil production at 1.88 million barrels per day, the exchange rate at N410.15 to the dollar, GDP at 4.2 percent and inflation at 13 percent.

In his presentation, the Executive Chairman, Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami, disclosed that about N6.4 trillion was collected by as taxes by the service last year.

Also, in his virtual presentation, the Group Managing Director Nigerian National Petroleum Corporation (NNPC), Mr. Mele Kyari, said the country now produces 1.74 million barrels of crude oil per day.

But he said the security situation in the country had cut the figures to 1.5 million barrels about three months ago before the latest improvement.

He said, “Three months ago we came down to 1.5 million barrels per day because of security issues and we are responding to it.

“As of today production has increased to 1.74 million barrels per day and there are ongoing interventions to better the situation on security.

“The expectations are that within the month, we will get to 1.8 million barrels per day and exceed the limit within the year.”


In a presentation, the Minister disclosed that as at November 2021, federal government’s aggregate revenue was N5.51 trillion, which was 74 per cent of its target for the fiscal year.

The federal government’s share of oil revenues was N970.3 billion (representing 53% performance of the prorated sum in the 2021 budget), while federal government’s share of non-oil tax revenues totalled N1.62 trillion (118.8% over and above the target).

Also, Companies Income Tax (CIT) and Value Added Tax (VAT) collections were N718.58 billion and N360.56 billion, representing 115 per cent and 165 per cent respectively of the prorata targets for the period. In 2021, Customs collections was N542.11 billion (104% of the target), while other revenues amounted to N2.8 trillion, of which the federal government’s independent revenues was N1.1 trillion while Government-Owned Entities’ (GOEs’) retained revenues was N1.20 trillion

On the expenditure side, she revealed that N12.56 trillion (or 94.1%) had been spent out of the N13.57 trillion prorata budget. This performance was inclusive of expenditure estimates of the GOEs but exclusive of Project-tied Loans.

Of the expenditure, N4.20 trillion was for debt service, and N3.02 trillion for personnel cost, including pensions.

As at November 2021, the federal government has expended N3.40 trillion for capital budget. Of this, N2.98 trillion represented 83 per cent of the provision for Ministries, Departments and Agencies’ (MDAs’) capital, N369.9 billion for multilateral/bilateral Project-tied loans, and N49.52 billion as GOEs capital expenditure


Zainab pointed out that the 2022 budget seeks to continue the reflationary policies of the 2020 and 2021 budgets of the government, which according to her, helped put the economy back on the path of recovery and growth.

“The 2022 Budget was prepared taking into consideration the policies/strategies contained in the 2022–2024 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP).

“The Budget was prepared using the Zero-Based Budgeting (ZBB) approach and in line with the government’s development priorities, as articulated in the National Development Plan (NDP) 2021-2025. Allocations to MDAs were guided by the core objectives of the NDP 2021 – 2025.

“The plan, with an investment size of N348.1 trillion, will be funded by the federal, state governments and the private sector. The 2022 federal government budget is the first key public sector contribution to implementing the plan,” she explained.

In terms of its key assumptions in the area of crude oil production, Ahmed noted that although Nigeria’s total production capacity was 2.5 mbpd, current (year to date) crude production was about 1.4mbpd (slightly short of the OPEC+ production quota), and an additional 300,000bpd of condensates, totaling about 1.6mbpd.

The Energy Information Administration (EIA) expects that global oil production would increase to match rising levels of global oil consumption.

OPEC crude production was projected to average 28.34 million barrels per day in 2022 higher than 26.94 million barrels per day forecast for 2021.

“We projected our base oil price at $57/bbl in 2022 in consultation with NNPC and other stakeholders. This was premised on the averages of forecasts by leading institutions, factors driving market fundamentals, global economic recovery, plans by governments and market sentiments.

“However, the National Assembly increased the proposed 2022 oil price benchmark of $57pbl to $62pbl. World Bank forecasts that crude oil prices will average $74pb in

2022 as oil demand strengthens and reaches pre-pandemic levels. The EIA expects Brent prices to average $70.05 per barrel in 2022,” she added.

The minister, while commenting on the critical sectoral allocations of the 2022 budget, said the education sector received N1.234 trillion with 815.69 billion allocated to the Ministry of Education and its agencies for recurrent and capital expenditure.

She also said N112.29 billion earmarked for the Universal Basic Education Commission (UBEC), while N306 billion was allocated for Tertiary Education Trust Fund (TETFUND) for infrastructure projects in tertiary institutions.

The health sector got N876.38 billion, representing 5.1 per cent of the total budget. The Ministry of Health and its agencies would received N770.87 billion for recurrent and capital expenditure including hazard allowance.

The defence and security sector gulped 13.4 per cent of the budget or N2.29 trillion while N1.42 trillion or 8.3 per cent of the budget was set aside for infrastructure development out of which N462 billion is mapped out for social development and poverty reduction programmes.


The federal government projected that in 2022, consumption would increase by about 9.36 per cent, from a revised N136.57 trillion in 2021 to N149.35 trillion in the present fiscal year. Nominal GDP was also projected to rise from N168.60 trillion in 2021 to N184.38 trillion in 2022 and then up to N221.78 trillion in 2024, while real GDP growth forecast was 4.2 per cent in 2022, 2.3 per cent for 2023 (election year impact) and 3.3 per cent in 2024.

In addition, inflation was projected to be double-digit in the medium-term given structural issues impacting cost of doing business, including high food distribution cost.

“However, current steady decline is expected to be sustained, seeing inflation rate drop to 13 per cent in 2022 and 10 per cent by 2024,” the minister further projected.


Ahmed in her presentation, stated that the projected aggregate revenue available to fund the 2022 budget of N10.74 trillion (inclusive of GOEs) was 32 per cent higher than the 2021 projection of N8.12 trillion.

Without the GOEs retained revenue, the government’s revenue was projected at N9.01 trillion.

She disclosed that in order to promote fiscal transparency, accountability and comprehensiveness, allocations to TETFUND and the budgets of 63 GOEs were integrated in the federal government’s 2022 budget proposal.

In aggregate, 35 per cent of projected revenues is to come from oil-related sources while 65 per cent is to be earned from non-oil sources.

The 2022 aggregate federal government expenditure (inclusive of GOEs and project-tied Loans) was projected to be N17.13 trillion, which was 18 per cent higher than the 2021 Budget.

On the other hand, recurrent (non-debt) spending, estimated to amount to N6.91 trillion, was 40 per cent of total expenditure, and 20 per cent higher than the 2021 budget.

She also disclosed that aggregate capital expenditure of N5.96 trillion was 35 per cent of total expenditure.

This provision was inclusive of the capital components of statutory transfers, GOEs capital and project-tied loans expenditures.

At N3.61 trillion, debt service was 21 per cent of total expenditure and 34 per cent of total revenues.

Provision to retire maturing bonds to local contractors/suppliers of N270.71 billion was 1.6 per cent of total expenditure.

The minister said the provision was in line with the federal government’s commitment to offset accumulated arrears of contractual obligations dating back over a decade.

“Overall budget deficit is N6.39 trillion for 2022. This represents 3.46 per cent of GDP.

Budget deficit is to be financed mainly by borrowings: Domestic sources -N2.57 trillion; foreign sources – N2.57 trillion; multi-lateral /bi-lateral loan drawdowns – N1.16 trillion and privatisation proceeds – N90.7 billion,” she added.


Ahmed reiterated that the federal government’s debt level was still within sustainable limits. According to her, borrowings were essentially for capital expenditure and Human Development, as specified in Section 41(1)a of the Fiscal Responsibility Act 2007.

“Having witnessed two economic recessions we have had to spend our way out of recession, which contributed significantly to the growth in the public debt. It is unlikely that our recovery from each of the two recessions would have been as fast without the sustained government expenditure funded partly by debt.

“To compound matters, the country has technically been at war, with the pervasive security challenges across the nation. This has necessitated massive expenditure on security equipment and operations, contributing to the fiscal deficit; Defence and Security sector accounts for 22 per cent of the 2021 budget.

“Nigeria’s Budget Deficit/GDP (-4.3%, as at November 2021) and Debt/GDP ratios (30% as at September 2021) are the lowest among Africa’s leading economies;

“However, Nigeria’s Debt Service/Revenue ratio (76% as at November 2021) is the highest among same African top economies. This is proof that what we have is not a classic debt sustainability problem, but a revenue challenge.

“Tax rates and compliance ratios are significantly higher in these comparator countries; For instance, Nigeria’s VAT rate of 7.5 per cent is the lowest in Africa, and less than 50% of the average rate,” she added.

According to Ahmed, efforts are ongoing to fix the country’s revenue challenge, saying cutting expenditure would not be a viable option.

“We must however continue to rationalise our expenditures as we cannot afford waste. In reality, our largest expenditure items are currently personnel cost, debt service and capital expenditure, which between them account for 85 per cent of the 2022 budget.

“There is very little scope for cut in any of these over the medium term. The most viable solution to our fiscal challenge therefore remains to grow our revenues and plug all leakages.

“Our target over the medium term is to grow our Revenue-to-GDP ratio from about 8

– 9 percent currently to 15 per cent by 2025. At that level of revenues, the Debt-to- Service-to-Revenue ratio will cease to be a critical concern,” the minister added.

She listed some measures to increase revenue to include improving tax administration framework including tax filing and payment compliance improvements; evaluation of the process and policy effectiveness of fiscal Incentives, including: review of sectors eligible for Pioneer Tax Holiday Incentives under the Industrial

Development Income Tax Relief Act (‘IDITRA’); dimensioning the cost of tax waivers/concessions, and evaluating their policy effectiveness; setting annual ceilings on tax expenditures to better manage their impact on already constrained government revenues and ensuring that MDAs appropriately account for and remit their internally generated revenue, among others.

“Government will continue to create the enabling environment for private sector to increase their investment and contribute significantly to job creation, economic growth and lifting millions of our citizens out of poverty. Early passage of the 2022 Budget for implementation from January 1, will significantly contribute towards achieving government macro-fiscal and sectoral objectives.

“However, revenue currently remains our main fiscal challenge. The government remains committed to the effective implementation of the Strategic Revenue Growth Initiatives to improve revenue collection, expenditure management and fiscal sustainability.

“We are optimistic about our ability to finance the budget considering the positive global oil market outlook and the continuing improvement in our non-oil revenues. We shall explore available opportunities for public-private partnerships, concessions as well as climate finance arrangements to fast-track the pace of our infrastructural development,” she added.


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