Nigeria: The 2016 Federal Budget: Is The Era Of Non-Oil Budgeting Here To Stay?

Last Updated: 30 December 2015
Article by Yomi Olugbenro
Most Read Contributor in Nigeria, October 2018

One of the interesting parts of the Budget speech is the proposed reduction in tax rates for small businesses

President Buhari presented the 2016 federal budget before a joint session of the National Assembly on 22 December 2015. It is the first time in recent years that the budget is presented in person by the President. The budget can be appropriately dubbed a non-oil budget as only 13% of the budget outlay is expected to come from oil.

The Federal Government proposed a budget of N6.08 trillion for 2016, with an interesting split of 70:30 between recurrent and capital expenditure. This is a bold step with the increase in capital expenditure from N557 billion in 2015 to N1.8 trillion in the 2016 budget. Capital expenditure is not just 30% of the budget, but represents an increase of 223% over prior year budget.

Projected revenue for 2016 is N3.86 trillion, with a deficit of N2.22 trillion. There has been divided views on the appropriateness of the size of the deficit. It may be appropriate to state that the level of borrowing is not the real issue but the purpose for which the debts are procured and judicious utilization. The deficit is about 2.16% of Nigeria's GDP and will take Nigeria's overall debt profile to 14% of GDP.

To finance the deficit, government intends to borrow a total of N1.84 trillion from within and outside the country. Domestic and foreign borrowings are projected at N984 billion and N900 billion respectively. All of the borrowings are said to have been earmarked for financing capital projects.

Despite the reduction in projected daily crude production and crude oil benchmark price, the projected revenue of N3.86 trillion is higher than the budgeted revenue for 2015 of N3.45 trillion. That's about an increase of 12% year on year. You may recall that in 2015, benchmark oil price was $53 per barrel with expected daily production of 2.28 million barrels per day. Considering the current realities, 2016 budget is based on a benchmark price of $38 per barrel. Crude oil production is estimated at 2.2 million barrels per day for 2016. It is important to stress quickly that the benchmark price is higher than the current price of crude.

The debate in past years has always been how close the benchmark should be to the price of crude. Excess crude account was created in the good old years to warehouse the difference between benchmark and actual price. This is no longer the case as Government now has to plan with expectation that actual crude price will rise back to benchmark.

Perhaps, one of the immediate cushion will be the balancing that may come from exchange rate. Official exchange rate is currently N197 to the Dollar. Based on current realities, it is unthinkable to expect that Naira will get stronger than N197 against the Dollar. The potential impact of any further weakening of the Naira may help to cushion the impact of crude price falling below the benchmark.

It is therefore understandable that Government will have to focus on non-oil revenues by broadening tax sources. This appear to be the direction of the budget. Efforts must now be directed at improving the effectiveness of the revenue collecting agencies. FIRS has already indicated its focus on widening the tax base. This is aimed at bringing in those that are not currently tax registered. Efforts in this direction are said to have started yielding results with new taxpayers being registered each day.

Some provisions of the tax laws that were also not being enforced previously are now being dusted with a view to enforcing them. An example is the provision requiring companies paying interim dividends to pay provisional tax. There has also been a review of the basis of tax filing by non-resident companies (NRCs). NRCs are now expected to file tax returns based on actual profits against prior practice of deemed profit.

Monitoring and enforcement mechanisms are also being strengthened to drive compliance and collection. The Customs Authority also just announced a record monthly revenue collection and indicated in a recent chat that it had already met its December target. These are just examples of steps being taken to increase non-oil revenue.

So, welcome to the new era of non-oil budgeting. We may begin to wonder whether the era of non-oil budgets is here to stay. In 2016, oil related revenues are expected to contribute only N820 billion. This represents 21% of the expected revenue of N3.86 trillion and 13% of total expenditure of N6.08 trillion.

A total of N1.45 trillion, about 38% of the projected revenue, will come from taxes. These are company income tax, share of VAT, customs/excise, and other taxes due to FG. Additional N1.51 trillion (about 39% of projected revenue) is expected to be raked in from other independent revenues. This is already strengthened with the full implementation of the Treasury Single Account by all Ministries, Departments and Agencies (MDAs) of Government.

One of the interesting parts of the Budget speech is the proposed reduction in tax rates for small businesses. The incentive will be a reduction in tax rates for smaller businesses as well as subsidized funding for priority sectors such as agriculture and solid minerals. Details of the proposed tax reduction was not provided. We expect the details in the coming days.

Suffice to say that there is an existing provision in Companies Income Tax Act (CITA) on small business taxation but with limited scope. While the standard income tax rate is currently 30%, small businesses in specific critical sectors of the economy are taxed at 20%. Eligible businesses are those engaged in manufacturing or agricultural production, solid minerals or export-oriented business. The annual turnover of eligible businesses in this category are capped at N1 million. This appears small based on present realities.

Companies in this critical sector enjoy special tax rate of 20% within their first 5 assessment years. This benefit is extendable for additional 2 years, to bring the total number of years to 7 subject to meeting certain conditions. The conditions are that the company must show evidence of good record keeping, sound management and remain in this critical sector of the economy. It may be safe to expect that the promised special tax regime for small businesses will focus on this critical sector of the economy as provided in CITA. This expectation is informed by Government's focus on agriculture, solid minerals and manufacturing sector.

The policy thrust of the budget proposal is to stimulate the economy. This explains the rationale for the level of deficit. Focusing on infrastructural development and aligning expenditure to long-term projects for sustainable development. The increase in over N1 trillion in capital expenditure is earmarked for the critical sectors of the economy. Works, Power and Housing - N433.4 billion, Transport- N202 billion, Special Intervention Programs - N200 billion, Defence - N134.6 billion and Interior - N53.1 billion.

The same trend is reflected in the recurrent expenditure. A significant portion of the recurrent expenditure is devoted to institutions that provide critical government services. Education N369.6 billion; Defence N294.5; Health N221.7 billion and Interior N145.3 billion. There is a reduction of 9% in non-debt recurrent expenditure, from N2.59 trillion in 2015 to N2.35 trillion in 2016. With N300 billion for Special Intervention Programs, non-debt recurrent expenditure amounts to N2.65 trillion.

Government must now ensure that resources are managed prudently and that the budget is fully implemented. The unemployed graduates are eagerly waiting to be part of the 500,000 that will be employed as teachers in public schools. The market women, traders and artisans, and their cooperative societies are waiting for the financial training and loans. The very poor and vulnerable are waiting for the conditional cash transfer program to be anchored by the office of the Vice President.

Expectations are that the budget will deliver on its promise of economic revival, inclusive growth and job creation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Yomi Olugbenro
Similar Articles
Relevancy Powered by MondaqAI
PwC Nigeria
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
PwC Nigeria
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions