Nigeria: Oil revenue drop forces government to look for cash.
Nigeria needs tax revenue as oil falls
Nigeria needs to collect more taxes from its non-oil sector to offset a sharp drop in earnings from its mainstay energy industry, the junior finance minister in Africa's biggest oil producer said today.
Remi Babalola said oil revenue fell to around $1 billion in January, down more than 50% from last year's monthly average of around $2.2 billion, hit by the global downturn denting oil demand and lower Opec export quotas.
"Swings in production and the international oil price have continued to create enormous volatility in government revenue, thereby truncating development plans and projects," Babalola told a conference in the capital, Abuja.
He said in a Reuters report that efforts by consumer nations, including the United States, the biggest buyer of Nigerian crude, and Brazil to develop biofuels also meant Nigeria needed to diversify its economy away from dependence on oil in the long term.
"Another looming threat is the global search for alternative sources of energy," he said. "What this means is that Nigeria and other oil producers may be holding on to a product that few would need in the future. The economic consequences of this will be very devastating."
Oil accounts for 80% of government revenue in Nigeria.
Babalola said efforts to increase non-oil revenue would come from improving the efficiency of the tax system rather than higher tax rates.
His ministry estimated that private companies and federal agencies owe more than 260 billion naira ($1.8 billion) and $260 million in back taxes.
Many companies outside the energy and telecoms sectors are able to avoid meeting their full tax obligations in Africa's most populous country because of endemic corruption, poor government oversight and lax enforcement.