Nigeria
Selected Issues and Statistical Appendix
Author:
International Monetary Fund
Search for other papers by International Monetary Fund in
Current site
Google Scholar Close
Publication Date:
06 Aug 2001
eISBN:
9781451828924
Language:
English
Keywords:
ISCR; CR; government; local government; federation; government transfer; revenue; U.S. dollar
Download PDF (3.9 MB)

This Selected Issues paper presents the current status of fiscal decentralization in Nigeria; discusses issues in reference to revenue assignment, distribution rules, and expenditure devolution; and analyzes the key challenges posed by the Nigerian model of fiscal decentralization. The paper also provides a statistical report for Nigeria on gross domestic product by sector of origin at current prices, constant 1990 prices, expenditure category at current prices, and constant 1990 prices; consolidated government revenue, finance, and expenditure; federal accounts operations; monetary survey during 1995–2000; summary of the tax system as of March 2001, and so on.

Abstract

This Selected Issues paper presents the current status of fiscal decentralization in Nigeria; discusses issues in reference to revenue assignment, distribution rules, and expenditure devolution; and analyzes the key challenges posed by the Nigerian model of fiscal decentralization. The paper also provides a statistical report for Nigeria on gross domestic product by sector of origin at current prices, constant 1990 prices, expenditure category at current prices, and constant 1990 prices; consolidated government revenue, finance, and expenditure; federal accounts operations; monetary survey during 1995–2000; summary of the tax system as of March 2001, and so on.

Nigeria: Basic Data, 1995-2000

article image
Sources: Nigerian authorities; and staff estimates.

Representative exchange rate; for 1997, refers to the autonomous foreign exchange market rate. Nominal and real effective exchange rate estimates are based on representative exchange rate estimates.

Consists of the federal, state, and local governments, the “First Charges.,” the Special Funds, and the Petroleum Special Trust Fund (PSIT).

I. ISSUES IN FISCAL DECENTRALIZATION IN NIGERIA1

A. Introduction

1. The Nigerian federation is composed of the federal government, 36 state authorities and the Federal Capital Territory of Abuja (up from three regions at independence), and 774 local authorities. Each level of authority comprises an executive and a legislative branch and, in some cases, a judiciary. The financial relations among these three levels of government are currently delineated by the 1999 constitution. This law sets broad responsibilities for the legislation and collection of revenue by the three tiers of government, the distribution of the revenue, and the delivery of public services. This note presents the current status of fiscal decentralization in Nigeria and discusses issues in reference to revenue assignment, distribution rules, and expenditure devolution. It draws on the work of a FAD mission that visited Nigeria in January 2001 to advise on fiscal decentralization.

B. Current Arrangements

Revenue

Revenue responsibilities

2. Federal authorities. The theory of fiscal decentralization suggests that taxes that are characterized by mobile bases2 should be assigned3 to the center (defined as the federation), so that taxes do not affect the decision of households and companies to settle in one jurisdiction as opposed to another. In line with this (neutrality) principle, the constitution has assigned the legislation of such taxes as company profit tax and value-added tax (VAT) to the national authorities. The responsibility for oil revenue is also given to the national assembly and the federal government in accordance with the regional equity principle, which specifies that tax bases that are unevenly distributed across jurisdictions be assigned to the center. The main exception to central control over a major source of revenue is the personal income tax. While the laws and policies governing this tax are national, the collection and use of this tax are generally entrusted to the states.4

3. State authorities. States are authorized to collect and use taxes that are governed by national legislation (personal income tax, stamp duties, capital gains taxes, etc.) and taxes over which they have legislative power (road tax, business registration fee, lease fees of state lands, etc.). All in all, states can raise their own revenue on 11 different tax bases (decree of September 30, 1998).

4. Local authorities. The fiscal decentralization literature suggests that local authorities administer taxes having a fixed base. In line with this tenet, the 1998 decree assigns many taxes to these administrations, including taxes on motor parks, shops, kiosks, restaurants, bakeries, houses, and buildings. In addition, the decree and the constitution grant them the collection of many mobile base taxes (licenses on televisions, radios, bicycles, etc.). The state legislature or the legislative council of local governments sets the rate and base of many of these taxes.

The revenue structure

5. Data sources. The fiscal data are limited to the operations of the federal government, There are no comprehensive and consistent data on subnational governments. The available financial data on the state and local governments come from annual surveys undertaken by the Central Bank of Nigeria (CBN). The coverage of states is comprehensive while that of local governments is selective. Although all the states participate in the survey, the quality of their responses differs. For instance, there are large discrepancies between the shares of federation account revenue resulting from the application of the theoretical allocation formula and the amounts reported in the surveys.5 Therefore, it is not possible to present consolidated fiscal accounts with a sufficient degree of accuracy.

6. Revenue structure. Table 1 contains data for 1993-2000 on oil and non-oil revenue collected by the federal government on behalf of the federation and non-oil receipts collected by the three tiers of government for their own use. The revenue data are weak in several respects:

Table 1.

Nigeria: Total Govemment Revenue, 1993-2000

article image
Sources: Nigerian, authorities; and staff estimates.

FIRS-PAYE = Federal Inland Revenue Service-pay as you earn.

  • The data for subnational governments are estimates obtained from surveys. Hence, they may be incomplete and insufficiently accurate.

  • The classification of the revenue collected by subnational governments for their own use as tax or nontax revenue is not always clear. However, based on the legislation that instituted these levies and the limited sources of nontax revenue at the disposal of the lower tiers of government, it can be assumed that virtually all the receipts collected by state and local governments for their own use are tax revenue.

  • For the period 1995-98, the revenue data for the federal government (and, therefore, of consolidated government) are distorted by the release of large amounts of profits made by the central bank on the domestic foreign exchange market resulting from the overvalued exchange rate of the naira used in official transactions in those years.

7. Concerning the composition of taxes, while the states’ own taxes are principally composed of personal income tax and withholding at source of interest income and dividends, no taxes are clearly dominant in respect of local governments. However, tenement rates appear to be a significant source of revenue for urban local governments.

8. The data show that the structure of government revenue is skewed in favor of oil revenue. For instance, although oil prices were low in 1999, petroleum receipts (including the profit tax of oil companies) represented about 73 percent of consolidated revenue. The remaining 27 percent of total revenue collected by the three tiers of government includes federal, state, and local governments’ own revenue, estimated at 1.7 percent, 3.4 percent, and 0.3 percent of total revenue, respectively.

9. The revenue profile of the states is characterized by the dominance of allocations from the federation account. These releases represented 61 percent of their revenue in 1999 (Table 2). Internally generated receipts stood at 20 percent. The dependence of local governments on revenue from the center is more pronounced, with releases from the federation account amounting to 73 percent of their total receipts in 1999 (Table 3). Local governments’ own revenue-generating efforts met less than 6 percent of their needs in that year.6 The situation has been similar for the federal government in recent years (1999-2000, Table 4). The dependence of subnational governments on revenue inflows from the center is heightened when the VAT is added to the allocations from the federation account, as is apparent from Figure 1. This dependence is due to the generally small and insufficiently elastic base of taxes assigned to the lower tiers of government.

Table 2.

Nigeria: Summary of Budgetary Operations of Stales and the Federal Capital Territory of Abuja(FCT), 1993-99.

article image
Source: Central Bank of Nigeria (CBN).
Table 3.

Nigeria: Summary of the Financial Operations of Local Governments, 1993-99

article image
Source: Central Bank of Nigeria (CBN).
Table 4.

Nigeria: Summary of the Financial Operations of the Federal Government, 1993-2000

article image
Sources: Nigerian authorities; and staff estimates.
Figure 1.
Figure 1.

Nigeria: Share of Transfers in Total Revenue of Each Tier of Government, 1993-99 1/

(Li percent)

Citation: IMF Staff Country Reports 2001, 132; 10.5089/9781451828924.002.A001

Source: Nigerian authorities,1/ Transfers are defined to include the federation account revenue (i.e., all oil-related receipts, company income tax, customs, and excise), and the value-added tax. The higher the ratio, the more dependent is the tier of government on revenue from the center.
Revenue-sharing arrangements

10. Two broad categories of revenue are shared by all three tiers of government. The first one is composed of oil revenue net of expenditures of the federation, called First Charges,7 and tax revenue collected by the federal government on behalf of the federation. This net revenue, known as the federation account revenue, is distributed in accordance with a formula that has changed over the years. The present rule allocates 48.5 percent of the revenue to the federal government, 24 percent to states, 20 percent to local governments and 3,5 percent to special funds (Figure 2). The balance of 4 percent, originally earmarked for OMPADEC8 (3 percent) and oil-producing areas through derivation (1 percent), has been reapportioned to the three levels of government subsequent to the creation of the Niger Delta Development Commission, the dissolution of OMPADEC, and the elimination of the derivation9 earmarked for the oil-producing regions.

Figure 2.
Figure 2.

Nigeria: Intergovernmental Financial Flows, 20001

Citation: IMF Staff Country Reports 2001, 132; 10.5089/9781451828924.002.A001

1 Figures in brackets refer to amounts in 2000 in percent of GDP at current market prices.2 JVC = Joint Venture Companies.3 NNPC = Nigerian National Petroleum Corporation.4 Transfer to the nine oil producing states based on onshore oil revenue alone.5 Transfers made after deducting the 13 percent derivation.6Composed of independent revenue of subnational governments and income tax collected by the federal government

11. The second category of shared revenue, the VAT, is also federally collected but is distributed according to a different formula that allocates 50 percent of the proceeds to the local governments, 35 percent to states, and 15 percent to the federal government.

12. The horizontal distribution (i.e., across states) allocates 40 percent to each state in equal amounts (i.e., equalization) and 60 percent based on six variables.10 The same rule applies to local governments.

13. The entire federation revenue is shared in the form of general-purpose, as opposed to specific-purpose, allocations. On occasions, the federal government undertakes operations that can be assimilated to specific-purpose transfers, like the construction of primary school buildings, an expenditure that is constitutionally the responsibility of subnational governments.

14. The constitution mandates a review of the revenue-sharing formula every five years. This review is to be conducted by the Revenue Mobilization, Allocation and Fiscal Commission. Its report is destined for the national assembly, which is empowered to modify the formula. Under the present dispensation, a new formula should be in place by 2002.

Expenditure devolution

15. The 1999 constitution defines three main lists of public services:

  • an exclusive list for the federal government (part I of the Second Schedule);

  • a joint list for the federal and state governments (part II of the Second Schedule); and

  • a list of duties for the local governments (Fourth Schedule).

List of the national authorities

16. The national assembly can make laws in areas of national interest, including defense, international affairs, elections, creation of states, the construction of roads and railways, banking and bankruptcy, the creation of commercial and industrial monopolies, the issuance of currency, exchange controls, labor laws, mines, trade and commerce, and weights and measurements (see table below).

Nigeria: Expenditure Assignments

article image
Source: E. Ahmad and others, “Nigeria: Options for Reforming Intergovernmental Fiscal Relations” (unpublished; Washington: International Monetary Fund, 2001).
Joint responsibilities

17. The federal and state legislatures can pass laws on such matters as the supply of electricity (Articles 13 and 14), postprimary education (Articles 27, 28, and 29), and industrial, commercial, and agricultural developments (Articles 17 and 18). In addition, states can promote primary, technical, vocational, and other forms of education (Article 30). Finally, the national assembly can vote laws on the collection and use of statistics, including on matters that are outside of its sphere of responsibility (Article 23b). The state assembly is empowered to make laws on statistics in its own domains of responsibility and those of local governments. The federal and state legislatures have joint responsibilities in a number of noneconomic areas as well, including electoral laws, scientific research, land surveys, and archives.

18. State and local authorities also have concurrent responsibilities in a few areas (primary education, health care, agriculture, etc.).

List of local authorities

19. The constitution instructs local authorities to supply many public services, including the construction and maintenance of roads, streets lights, drains, public conveniences, sewages, refuse disposal, slaughterhouses, markets, metro parks, open spaces like parks, burial grounds, homes for the destitute and handicapped persons, and other public facilities as prescribed by the state assembly. In addition, the constitution mandates that local authorities collaborate with state authorities to provide and maintain primary, adult, and vocational training centers and health services. It orders a similar cooperation to develop agriculture and natural resources other than minerals.

Borrowing regulations

20. The authority to borrow in Nigeria is governed by the Borrowing by Public Bodies Act of 1978 and the 1999 constitution (Article 7 of the Exclusive List). Under these laws, only the federal government can contract external loans for its own use or that of a state. There is no limit on the amount of external or domestic loans that the federal government can acquire, except for central bank credit, which is limited to 12.5 percent of the current year’s revenue of the government. The limit guaranteed by the federal government on foreign loans to a state is 30 percent of that state’s share of federation account revenue. In many cases, states authorize loan reimbursements to be deducted from their share of federation account receipts.

21. States can borrow money from banks and nonbank sources without federal government approval or guarantee. There are no limits on such loans. The constitution is silent about the borrowing powers of local governments. Banks have extended credit to some local administrations, often with state guarantees or authorizations to deduct at source from their shares of federation account revenue as reimbursements. There are no reliable and comprehensive data on the debt of subnational governments.

22. The Debt Management Office (DMO) of the Federal Ministry of Finance and the Central Bank of Nigeria manage, respectively, the external and domestic debt of the federal government The administration of the domestic debt is expected to be taken over by the DMO.

The institutions

23. The institutional setting for budget management is essentially the same for the federal and state governments. However, the budgetary process is quite different for the three tiers of government.

24. The setting. The financial institutions of states mirror those of the federal government, comprising an Inland Revenue Service and an expenditure office, an accountant general and an auditor general. The budgets of local governments are managed by a treasurer and are audited by the state auditor general. Both the federal government and the states rely on commercial banks for their financial operations. In addition, the federal government maintains several accounts at the central bank.

25. The National Planning Commission (NPC) prepares a three-year rolling plan, during which it carries out a coordinating exercise with state governments in order to ensure the internal consistency of the investment program of all three tiers of government.11 Another mechanism for coordination of financial policies is the Federation Account Committee, charged with the monthly distribution of the federally collected revenue. This committee is composed of the commissioners of finance of all 36 states and is chaired by the federal minister of finance. Information on revenue prospects and trends is provided in this forum to subnational governments for the preparation and eventual revision of their annual budgets.

26. All levels of government follow a largely similar but not harmonized system of budget classification and accounting. The Financial Control Act of 1990 guides the preparation and execution of the federal government budget, whereas the budget of subnational governments conforms to the Memorandum of Financial Instructions of 1998. However, in practice, there are no standardized nomenclature or codification of accounting rules and budgeting.

27. Procedures. In general, the preparation of the budget by subnational governments is not guided by macroeconomic forecasts disseminated by the federal government. It follows a bottom-up, incremental approach, with no hard aggregate spending limits. The formulation of the budgets of state and local governments is further complicated by several deductions made from the source.

28. Under the democratic dispensation, the federal and state budgets are discussed and approved by the relevant legislature and executed by the government. However, there seems to be no clear rule underpinning the process for local governments, with the state institutions having to approve the budget of some of them, and local councils having to it in other cases.

C. Issues in Fiscal Decentralization in Nigeria

29. For several decades, the critical issue of control over revenue has strained intergovernmental relations in Nigeria. The 1999 constitution mandated that more revenue be allocated to the oil-producing states. However, this has not ended calls for resource control. Several other problems have hindered the smooth and satisfactory functioning of fiscal federalism in the country.

Derivation versus distribution

30. The dispute between the control of large revenue generated in specific parts of the country and the demand for distribution of this revenue to all governments has always been on the Nigerian political agenda. In this regard, several commissions12 advised the government before and after independence in I960. Derivation was applied not only to oil revenue, but also to non-oil receipts, such as customs duties (Hicks-Phillipson Commission, 1951). After the 1980s, the issue of oil derivation came to the fore because the oil-producing states felt neglected by several military regimes. The 1999 constitution stipulates the release of 13 percent of the oil revenue, net of federation charges, to these regions. In addition, the federal government and oil-producing companies are required by law to pay for the rehabilitation and the economic development of these regions under the Niger Delta Development Commission Act of 2000. These provisions have not, however, proved satisfactory, as many recipient states either challenge the base of the 13 percent derivation13 or call for a total control of the oil revenue. The dispute about the base is so strong that the federal government has asked for a Supreme Court ruling on the issue. At the same time, several oil-producing states have formed an association to seek total control of oil revenue. Likewise, Lagos State, where substantial amounts of VAT and customs duties are collected, has called for the distribution of these receipts on the basis of derivation.

Macroeconomic policy

31. There is no legal mechanism to impose fiscal discipline on the lower tiers of government (for example, in the form of saving excess revenue or imposing expenditure ceilings). The constitutional order to release federation revenue to subnational governments based on a predetermined formula, combined with the increase in the budgeted price of oil and the release of higher-than-budgeted oil revenues has led to a large increase in the distribution of financial resources to these governments during the past two and a half years. The increase in resources is even greater for oil-producing states because of the 13 percent derivation rule. By way of illustration, the federation revenue released to subnational governments rose sharply from ₦237 billion (7.4 percent of GDP) in 1999 to ₦551 billion (13,1 percent of GDP) in 2000, and amounted to ₦275 billion (6,2 percent of GDP) in the first quarter of 2001 alone. The rapid increase in aggregate demand stemming from such large injections into the economy contributed to rising inflation and a sharp depreciation of the naira in the parallel market. On the spending side, the annual budgets of subnational governments (and the federal government) are not based on medium-term expenditure profiles. Since there are no limits on domestic borrowing, subnational governments could incur large debts during periods of economic downturn or when oil prices are low, thereby complicating macroeconomic management

32. While the present arrangement gives state authorities flexibility to set their budgetary priorities, it has also drawbacks:

  • It provides no mechanism for an orderly adjustment, in the face of falling revenue.

  • It places the burden of macroeconomic adjustment, particularly fiscal adjustment on the federal government, which accounts for less than 50 percent of the federation revenue injected into the economy.

Transfers

33. Minimum public services. One drawback of the present allocation arrangement is that it is not based on a clearly defined set of minimum public services to be provided to all Nigerians irrespective of their place of residence. As a result, there is no assurance that the resources are effectively applied toward satisfying the priority needs of the population. The data collected by the central bank suggests that, during the period 1993-99, the wage bill and overhead of local governments represented an average of 34 percent and 32 percent of their share of federation revenue while capital expenditure accounted for 31 percent. The share of recurrent outlays (i.e., wages and overhead) in total expenditures fell during the period, thereby creating room for capital expenditures, which, in the case of Nigeria, cover outlays on public services and development needs (Figure 3). However, the large wage increase granted on May 1, 2000 may have reversed this trend.

Figure 3.
Figure 3.

Nigeria: Share of Recurrent Expenditure in Total Expenditure of Each Tier of Government, 1993-99 1/

(In percent)

Citation: IMF Staff Country Reports 2001, 132; 10.5089/9781451828924.002.A001

Source: Nigerian authorities.1/ The expenditure of the federal government does not include First Charges (considered as federation expenditure). The higher the ratio of recurrent spending, the fewer resources are devoted notably to investment,

34. Financial disparities. Another difficulty in designing and implementing macroeconomic policy in Nigeria resides in the disparities in per capita resources among states (and, certainly, local governments). This analysis is only illustrative because of serious weaknesses in the data used. Indeed, the data on transfers to state governments come from surveys that may lack comprehensiveness and accuracy. More important, there are no data on income and population for each state. The estimates used in this regard are expenditure and population figures derived from a 1996 household survey on poverty commissioned by the World Bank (Table 5). The data (Figure 4) reveal the following:

Table 5.

Nigeria: Per Capita Goverment Tranment and Income, 1996 1/

(In naira)

article image
Sources: Central Bank of Nigeria; and staff estimates.

The data are annual. Government transfers include allocations from the federation account and the value-added tax. The income data were derived from a survey commissioned by the World Bank in 1996. These data do not include government transfers

Oil- producing states.

Figure 4.
Figure 4.

Nigeria: Per Capita Income and Per Capita Government Transfers by State, 1996

(In naira)

Citation: IMF Staff Country Reports 2001, 132; 10.5089/9781451828924.002.A001

Per Capita Income O States in the East ? States in the West A States in the North |

  • States differ significantly in their ability to generate income. However, the disparity between the highest and lowest per capita income is smaller than in the case of government transfers. The ratio is about 6 for the former, compared with 8 for the latter.

  • The ability to generate income appears to be stronger overall in the east and west than in the north, a reflection of differences in agricultural endowment and level of industrialization. Interstate disparities in per capita income also seem to be more marked in the northern region than elsewhere.

  • There are wide differences in per capita transfers among states, with the largest allocation amounting to over eight times the smallest release.

  • None of the three main regions of the country (east, west, or north) appears to have been overwhelmingly favored by the distribution of federally collected revenue. However, interstate disparities seems to be more pronounced in the north than in the other two regions.

In general, government transfers outstrip income. This is the case in all northern states. In a few eastern and western states, the private sector is able to generate more income per capita than releases from the center.

Expenditure assignment

35. Policy coordination. The assignment of joint responsibilities to the different tiers of government to provide services in the same area requires close collaboration in order to ensure efficient delivery. The responsibility for primary education provides an illustration of the challenges posed by the current expenditure assignment in the absence of such a coordination. In 1981, the federal government withdrew from the funding of primary education and transferred this responsibility to subnational governments. Because of the fall in oil prices in the second half of the 1980s, releases to these governments dropped, leading to the suspension of the construction of schools and difficulties in paying teachers’ salaries. In reaction to teachers’ strikes, the federal government mandated the National Primary Education Commission (NPEC) to formulate primary school education policy, and to manage and allocate funds for primary education, including paying teachers. In 1993, State Primary Education Boards (SPEBs) were created and charged with the recruitment of teachers, the negotiation of their salaries, and the enforcement of discipline. The Local Government Education Authorities, established at the same time, were entrusted with the tasks of day-today operation of the schools, the acquisition of materials and equipment, and general maintenance of school buildings.

36. Funds for primary education are deducted at source from the share of federation account revenue that is earmarked for local governments. But the latter do not have control over primary education policy and its funding. The NPEC defines this policy and manages the money belonging to local governments but does not report to them. In fact, it is not clear that these funds are well identified in the budget of any of the three tiers of government.

37. Lack of public service or duplication. Another difficulty of the shared responsibility system is its inherent risk that neither one of the levels of government concerned might provide the required public service because each level of administration assumes that another level will deliver the service. Furthermore, in the absence of effective coordination, there is a risk of duplication of efforts14 or conflict of actions, with a resulting waste or misuse of scarce resources.

Data

38. Fiscal analysis in Nigeria is hampered by the lack of reliable and comprehensive data on the financial operations of all tiers of government, particularly subnational governments.

39. At the level of the federal government, revenue data are fragmented among collection agencies, the Nigerian National Petroleum Corporation or NNPC (government oilmarketing company), and the Central Bank of Nigeria (CBN). Revenue monitoring is further complicated by the operations of many accounts opened abroad and locally by the CBN for the federal government. In addition, line ministries hold several accounts in commercial banks across the country. To impose discipline, the federal government reduced the number

Table 6.

Nigeria: Gross Domestic Product by Sector of Origin at Current Prices, 1995-2000 1/

article image
Sources: Federal Office of Statistics; and staff estimates,

Reflects revisions made by the Fund staff through exchange rates used for oil GDP (see Dhonte and others, Nigeria-Selected Issues and Statistical Appendix, IMF Stall Country Report No. 98/78 (Washington: IMF, 1998), as well as through the use of primary data on the oil sector provided by the Nigerian National Petroleum Corporation.

Table 7.

Nigeria: Gross Domestic Product by Sector of Origin at Constant 1990 Prices, 1995-2000 1/

article image
Sources: Federal Office of Statistics; and staff estimates.

See footnote in Table 1.

Table 8.

Nigeria: Gross Domestic Product by Expenditure Category at Current Prices. 1995-2000 1/

(In millions of naira)

article image
Sources: Federal Office of Statistics; Federal Ministry of Finance: Central Bank of Nigeria; and staff estimates.

Reflects revisions made by the Fund staff.

National disposable income less aggregate consumption.

Domestic disposable income (GDP) less aggregate consumption.

Table 9.

Nigeria: Gross Domestic Product by Expenditure Category at Constant 1990 Prices 1995-2000 1/

(In millions of naira)

article image
Sources: Federal Office of Statistics; Federal Ministry of Finance; Central Bank of Nigeria; and staff estimates.

Reflects revisions made by the Fund staff.

National disposable income less aggregate consumption.

Domestic disposable income (GDP) less aggregate consumption.

Table 10.

Nigeria: Selected Petroleum Statistics, 1995-2000

article image
Sources: Central Bank of Nigeria; Nigerian National Petroleum Corporation; and staff estimates.

Includes condensates.

Balance of payments basis, including exports of condensate.

U.K. Brent, light-blend 38 API, f.o.b. United Kingdom.

Average price of high-“pour” and low-“pour” fuel oil.

Table 11.

Nigeria: National Consumer Price Indices, 1994-2001

(September 1985=100)

article image
Sources: Central Bank of Nigeria; and Federal Office of Statistics.
Table 12.

Nigeria: Urban Consumer Price Indices, 1994-2001 (September 1985 = 100)

article image
Sources: Central Bank of Nigeria, and Federal Office of Statistics.
Table 13.

Nigeria: Rural Consumer Price Indices, 1994-2001

(September 1985 = 100)

article image
Sources: Central Bank of Nigeria; and Federal Office of Statistics.
Table 14.

Nigeria: Consolidated Government Finance. 1995-2000 1/

article image
Sources: Federal Ministry of Finance; and staff estimates.

Consists of the Federal, state and local governments, “First Charges,” Special Funds, the Petroleum Special Trust Fund (PSTF).

Includes PSTF recurrent expenditure, fertilizer subsidy, customs levies, Education Fund and presecondary foreign exchange market (SFEM) payments.

Consists of Federal government budgetary capital expenditure, national priority projects, cash calls, Nigerian National Petroleum Corporation (NNPC) priority projects, and PSTF capital expenditure. Starting in 1999, expenditures on national priority projects and local contractors have been classified as domestic arrears.

Includes adjustment for PSTF deposits held in the commercial and merchant banking system.

Primary balance is defined as total revenue less total expenditure, excluding interest payments due.

Table 15.

Nigeria: Consolidated Government Revenue, 1995-2000 1/

(In millions of naira)

article image
Sources: Federal Ministry of Finance; and staff estimates.

Consists of the federal, state and local governments, “First Charges,” the Special Funds, and the Petroleum Special Trust Fund (PSTP).

Mainly company income tax collected by the Federal Inland Revenue Service.

Consists of personal income tax, and other taxes and fees collected by state governments. The Federal Inland Revenue Service also collects a small amount of personal income tax from armed forces personnel and inhabitants of the Federal Capital Territory.

Consists of import duties, excise duties, and fees that go directly to the federation account.

Consists mainly of earmarked import levies of a 5 percent port development surcharge, a 1 percent Nigerian Shippers’ Council surcharge, and a 1 percent Raw Materials Research and Development Council surcharge.

Proceeds fom the sale of crude oil to domestic refineries.

Consists of dividends from public enterprises, directors’ fees and loan recoveries.

Consists of interest earned on. PSTF balances held as deposits and treasury bills.

Table 16.

Nigeria: Consolidated Government Expenditure, 1995-2000 1/

(In millions of naira)

article image
Sources: Federal Ministry of Finance, and staff estimates.

Consists of the federal, state and local governments, “First Charges,” Special Funds, and the Petroleum Special Trust Fund (PSTF).

Includes the Special Funds.

Table 17.

Nigeria: Federation Account Operations, 1995-2000

(In millions of naira)

article image
Sources: Federal Ministry of Finance; and staff estimates.

Since 1992, the allocation formula of federation account revenue has been 48,5 percent for the federal government, 24.0 percent for state governments, 20,0 percent for local governments, and 7.5 percent for Special Funds. Subsequent to the creation of the Niger Delta Development Commission in 2000, the share of the former OMPADEC and derivation totaling 4 percent has been distributed mainly to the three tiers of governments, thereby reducing the share of Special Funds to 3.5 percent (see the chapter on Issues in Fiscal Decentralization in Nigeria at the beginning of this report).

Table 18.

Nigeria: Summary of Federal Government Fiscal Operations, 1995-2000 1/

(m millions of naira, unless otherwise indicated)

article image
Sources: Federal Ministry of Finance; and staff estimates.

Consists of the federal government and the Petroleum Special Trust Fund (PSTF).

Consists of dividends from public enterprises, directors’ fees, and loan recoveries from public enleiprises.

Consists of interest earned on PSTF balances held as deposits and treasury bills.

Through 1998, the balancing item reflects the difference between total spending implied by net credit to government derived from the monetary accounts and total spending from the fiscal accounts. In 2000, the balancing item reflects N13.3 billion in expenditure financed from from a drawdown of line ministries’ commercial bank accounts.

Includes adjustment for PSTF deposits held in the commercial and merchant banking system, which are classified as private deposits.

Primary balance is defined as total revenue less total expenditure, excluding interest payments due.

Table 19.

Nigeria: Budgeted Total Expenditure of the Federal Government by Functional Classification, 1995-99 1/

article image
Sources: Central Bank of Nigeria, Annual Reports; and staff estimates of the interest due

Data on actual expenditures by functional classification are not available.

Includes pensions, gratuities, and contingencies.

Table 20.

Nigeria: Budgeted Recurrent Expenditure of the Federal Government by Functional Classification, 1995-99 1/

article image
Sources: Central Bank of Nigeria, Annual Reports; and staff estimates of the interest due.

Data on actual expenditures by functional classification are not available.

Includes pensions, gratuities, and contingencies.

Table 21.

Nigeria: Budgeted Capital Expenditure of the Federal Government by Functional Classification, 1995-99 1/

article image
Sources: Central Bank of Nigeria, Annual Reports.

Data on actual expenditures by functional classification are not available.

Table 22.

Nigeria: Federal Government Outstanding Domestic Debt, 1995-2000

article image
Sources: Central Bank of Nigeria, Annual Reports; and staff estimates.
Table 23.

Nigeria: Summary of Budgetary Operations of State and Local Governments and Special Funds, 1995-99 1/

article image
Source: Central Bank of Nigeria, Annual Reports.

These data, obtained through annual surveys undertaken by the Central Bank of Nigeria, are only illustrative.

This revenue is on a gross basis (i.e., before deductions, at the level of the federation, for payments of various commitments made by the subnational governments).

Mainly personal income tax collected by state governments.

Total spending is underestimated because only a sample of local governments are covered and spending on behalf of the state and local governments for which deductions were made at source (footnote 2) may not have been included.

This residual may reflect an underestimation of expenditure.

Table 24.

Nigeria: Monetary Survey, 1995-2000 1/

article image
Sources: Central Bank of Nigeria; and staff estimates.

Consolidated accounts of the Central Bank of Nigeria, commercial banks, and merchant banks.

Capital accounts and bonds and money market instruments.

Table 25.

Nigeria: Consolidated Accounts of the Central Bank, 1995-2000

(Tn millions of naira; end of period)

article image
Source: Central Bank of Nigeria.

Includes both merchant and commercial bank deposits deposited at the central bank branches.

Includes nonfinancial public sector, state and local governments, and other financial institutions.

Table 26.

Nigeria: Consolidated Accounts of Commercial Banks, 1995-2000

(In millions of naira; end of period)

article image
Source; Central Bank of Nigeria.

Includes deposits of state and local governments.

Table 27.

Consolidated Accounts of Merchant Banks, 1995-2000

(In millions of naira; end of period)

article image
Source: Central Bank of Nigeria.

Includes deposits of state and local governments.

Table 28.

Nigeria: Selected Interest Rates, 1995-2001

(In percent; end of period)

article image
Source: Central Bank of Nigeria.

At commercial banks.

Table 29.

Nigeria: Financial Institutions and Branches, 1995-99

(In number of banks and branches)

article image
Source: Central Bank of Nigeria.

Excluding community banks.

All urban branches.

Table 30.

Nigeria: Balance of Payments, 1995-2000

(In millions of U.S. dollars, unless otherwise specified)

article image
Sources: Nigerian authorities; and staff estimates.

In 2000, reflects the Paris Club rescheduling agreement of December 13,2000.

As percent of exports of goods and nonfactor services.

Table 31.

Nigeria: Direction of Trade Statistics, Imports, 1996-2000

article image
Source: IMF, Direction of Trade Statistics.

Excluding imports related to the oil and gas sectors.

Table 32.

Nigeria: Direction of Trade Statistics, Exports, 1996-2000

article image
Source: IMF, Direction of Trade Statistics.
Table 33.

Nigeria: External Public Debt, 1996-2000 1/

article image
Sources: Nigerian authorities; Paris Club; and staff estimates.

As reported by creditors. These figures are tentative pending the reconciliation of Nigeria’s obligations with Paris Club creditors.

Excluding late interest in 1996-99. In 2000, including late interest as reported by the Paris Club and capitalized moratorium interest as estimated by staff.

Table 34.

Nigeria: Central Bank Sales of Foreign Exchange in the AFEM/IFEM, 1998-2000 1/

(In millions of U.S. dollars, unless otherwise specified)

article image
Source: Central Bank of Nigeria.

The Central Bank of Nigeria (CBN) discontinued the weekly Autonomous Foreign Exchange Market (AFEM) on October 28,1999, after the CBN had shifted its sales and purchases of foreign exchange to the daily interbank market (IFEM).

Before the unification of the exchange rate at end-1999, the Central Bank of Nigeria purchased foreign exchange from (a) the federal government at the official exchange rate; and (b) oil companies, commercial banks and others at the prevailing AFEM exchange rate.

Table 35.

Nigeria: Exchange Rates, January 1998 - December 2000 1/

(In naira per U.S. dollar, unless otherwise specified)

article image
Source: Central Bank of Nigeria.

See footnote 1 and footnote 2 in Table 34.

Summary of the Tax System as of March 2001

(All amounts in naira)

article image
article image
article image
article image
article image
article image
article image
1

Prepared by Lubin Doe (Fiscal Affairs Department).

2

A mobile base tax is a tax with a base that can be transferred or moved to another jurisdiction by the potential taxpayer, For instance, the income of an ambulant trader can be transferred across borders. Likewise, by adjusting internal prices, a company can reallocate accounting profits among subsidiaries in different jurisdictions. However, the base of a piece of real estate cannot be moved and is said to be immobile or fixed.

3

Typically, three notions are covered under revenue assignment: jurisdiction, collection, and use. Revenue (often tax) administration or management deals with collection and, in some cases, use. As much as possible, the distinction is made toavoid confusion.

4

The income tax owed by certain groups of persons is collected and used by the federal government. These are members of the armed forces of the federation, the national police, residents of the Federal Capital Territory of Abuja, the staff of the Ministry of Foreign Affairs, and nonresident individuals.

5

These discrepancies may be due in part to deductions at source, for instance to pay the salaries of primary school teachers in the case of local governments.

6

The VAT (14 percent) and other revenue (5 percent) accounted for the balance.

7

Including a special allocation to the nine oil-producing states called the 13 percent derivation. This revenue is distributed in proportion to the share of each state in the total onshore oil production.

8

OMPADEC stands for Oil and Mineral Producing Areas Derivation Account.

9

derivation is a policy or a practice whereby a given jurisdiction is allocated a specific share (up to 100 percent) of the receipts of a tax or revenue (for example, personal income tax) collected within its borders.

10

The variables are population (30 percent), land mass (10 percent), internal revenue generation efforts (10 percent), secondary school enrollment (4 percent), number of hospital beds (3 percent), and rainfall (3 percent). The revenueshares depend positively on the first three variables and negatively on the last three.

11

States are expected to coordinate the investment programs of local governments.

12

Most notably the Phillipson Commission (1946), the Hicks-Phillipson Commission (1951), the Chick Commission (1953), the Raisman-Trees Commission (1958), the Binns Commission (1964), the Aboyade Technical Committee (1977), the Okigbo Commission (1980), and the Danjuma Commission (1989).

13

About 60 percent of the Nigerian oil is produced onshore and 40 percent offshore. The federal government argues that offshore water and land are federation property, and hence, that revenue from offshore oil should accrue to the federation. By contrast, the oil-producing states, many of which are coastal, contend that the offshore oil belongs to them as well, so that the 13 percent ratio should be applied to 100 percent, not 60 percent, of oil revenue.

14

According to the 2000 National Water Supply and Sanitation Policy, the federal government is charged with the development and maintenance of bulk water supply facilities. Meanwhile, drilling, construction of boreholes, water treatment plants, and distribution networks are the responsibility of states. In practice, the federal government has undertaken several projects that fall within the purview of states.

Same Series

Other IMF Content

Other Publishers

  • Collapse
  • Expand
Cover IMF Staff Country Reports
Nigeria: Selected Issues and Statistical Appendix
Author:
International Monetary Fund
Volume/Issue:
Volume 2001: Issue 132
Publisher:
International Monetary Fund
ISBN:
9781451828924
ISSN:
1934-7685
Pages:
62
DOI:
https://doi.org/10.5089/9781451828924.002
  • Figure 1.
    View in gallery
    Figure 1.

    Nigeria: Share of Transfers in Total Revenue of Each Tier of Government, 1993-99 1/

    (Li percent)

  • Figure 2.
    View in gallery
    Figure 2.

    Nigeria: Intergovernmental Financial Flows, 20001

  • Figure 3.
    View in gallery
    Figure 3.

    Nigeria: Share of Recurrent Expenditure in Total Expenditure of Each Tier of Government, 1993-99 1/

    (In percent)

  • Figure 4.
    View in gallery
    Figure 4.

    Nigeria: Per Capita Income and Per Capita Government Transfers by State, 1996

    (In naira)

Figure 1.

Nigeria: Share of Transfers in Total Revenue of Each Tier of Government, 1993-99 1/

(Li percent)
Figure 2.

Nigeria: Intergovernmental Financial Flows, 20001
Figure 3.

Nigeria: Share of Recurrent Expenditure in Total Expenditure of Each Tier of Government, 1993-99 1/

(In percent)
Figure 4.

Nigeria: Per Capita Income and Per Capita Government Transfers by State, 1996

(In naira)