August 16, 2021/CSL Research

Leveraging the continued macro-economic recovery, Nigeria’s fiscal position received a huge boost in H1 2021, as manifested by an all-time high half-year return in Value Added Tax (VAT) and Company Income Tax (CIT). The performance was an offshoot of improved collection, macroeconomic conditions, and consumption, along with impressive corporate performances. Based on the data published by the National Bureau of Statistics (NBS), the collection of Company Income Taxes (CIT) for the first half of the year was N864.7bn, increasing 23.9% y/y compared with N697.7bn collected in the prior period. In Q2 2021 standalone, CIT collections rose to N472.1bn, showing a 20.2% q/q improvement from Q1 2021 and beat that of Q2 2020’s N402.0bn by 17.4% y/y.  

Further analysis of the contribution to CIT revenue generated in Q2 2021 revealed that CIT from local companies was the silver bullet as Other Payments and Foreign CIT Payments went downhill, declining by 91.30% y/y and 56.8% y/y, respectively. For Other Payments made via electronic channels (E-Transact, E-Tax pay & Remita), we imagine that the impact of relaxed movement restrictions might have stoked growth. We however note that payments via these channels were not grouped into sectors, making the comparison a herculean task.

Nevertheless, based on the classifications made available by NBS, Professional Services (N130.1bn), Other Manufacturing (N87.3bn) and Banks & Financial Institutions (N60.0bn) contributed the most to collections in Q2 2021. On the other hand, Pioneering (N64.3m), Automobiles & Assemblies (N62.2m) and Textile and Garment Industry (N27.2m) generated the least.

Lastly, the growth in CIT collections is commendable, especially at a time revenue from VAT also had the highest half-year number on record (N1.0tn), an impressive outing in our view. Revenue from both CIT (+23.9% y/y) and VAT collections (+54.8% y/y) culminated in N1.9tn in H1 2021, an improvement of 38.8% y/y relative to N1.3tn in H1 2020. Also, a comparison to the budgeted revenue from VAT and CIT (N920.1bn) in 2021 shows it is twice as tall, beating the budget estimates by 2.0x. In effect, we see a significant boost to public finances in the year.