FIRS Falls Short of Revenue Target in First Four Months of 2024, Raising Concerns Over Oil Sector Performance

The Federal Inland Revenue Service (FIRS) has failed to meet the approved 2024 budget target of N9.96 trillion, with a significant shortfall in oil tax revenues. As of April 2024, the FIRS has only collected N1.63 trillion from oil taxes, a stark 49% of the expected N3.32 trillion. This leaves the agency N1.69 trillion below its goal.

Despite setting an internal target of N7.5 trillion for the year, aiming for a monthly average of N625 billion, the FIRS has only achieved 65% of its four-month goal, collecting 22% of the annual target. While there has been a slight increase compared to the N1.19 trillion collected in the same period last year, the figures remain well below expectations.

The FIRS’s collection has been largely dependent on Petroleum Profits Tax (PPT) and Hydrocarbon Tax (HT) from foreign firms, with no contributions from local firms this year. Foreign receipts amounted to N966.73 billion, an 84% increase from last year’s N525.14 billion, likely driven by higher oil prices and naira devaluation. However, the absence of local receipts, which were N664.90 billion in 2023, highlights significant domestic challenges.

The Nigerian oil sector faces numerous hurdles, including pipeline vandalism, illegal bunkering, and theft. The aging infrastructure, much of which is around 70 years old, further exacerbates these issues. Consequently, the government has consistently missed its revenue targets from this sector, generating only 35.4% of its targeted oil revenue in 2022 and about 60% in 2023.

Major oil firms like TotalEnergies, Shell, ExxonMobil, and Norway’s Equino are exiting the Nigerian market due to these persistent challenges. TotalEnergies’ CEO, Patrick Pouyanne, cited policy inconsistencies and other issues as reasons for investing $6 billion in Angola instead.

Nigeria’s struggle to meet its OPEC quota continues, with an average daily production of 1.281 million barrels in April 2024, falling short of the 1.5 million barrels daily quota set by OPEC+. This inability to meet production targets negatively impacts revenue generation, foreign exchange stabilization, budget performance, and foreign reserves.

Despite these challenges, the government maintains an optimistic goal of increasing oil production to 4 million barrels daily by the end of the decade. However, the current situation raises serious concerns about the feasibility of this target and the overall stability of Nigeria’s oil-dependent economy.