December 7, 2021/CSL Research
The National Bureau of Statistics (NBS) published data on the revenue generated from both Value Added Tax (VAT) and Company Income Tax (CIT) collections in Q3 2021. The total VAT collected in Q3 2021 was N500.5bn, a slight decline of 2.3% q/q from N512.3bn in Q2 2021. Y/y, Q3 VAT numbers rose by 17.8% y/y relative to N424.7bn in Q3 2020. On the other hand, CIT collections increased to N472.5bn in Q3 2021, showing a flattish growth of 0.1% from Q2 2021 and beating the N416.0bn generated in Q3 2020 by 13.6% y/y. The growth in CIT collections may be due to improved corporate performances, leveraging the continued macroeconomic recovery.
Further analysis of the contribution to VAT revenue collected solely in Q3 2021 revealed that VAT on locally produced goods (i.e., non-import VAT) alongside Nigerian Customs Service (NCS)-Import VAT were the silver lining as non-import (foreign) VAT declined by 60.9% q/q and 29.6% y/y. We believe the growth in VAT on locally produced goods (+57.6% q/q and +37.6% y/y) reflects the gradual recovery in consumption. For CIT collections, foreign CIT payment largely drove the q/q increase (up 249.8% q/q to N180.5bn) as local CIT declined by 30.1% q/q to N292.0bn in Q3 2021. We believe the growth in foreign CIT payment may be partly due to the impact of currency adjustments. No revenue was generated from Other Payments in Q3 2021.
Overall, the total VAT and CIT collections have grown by 40.2% y/y and 20.1% y/y to N1.5tn and N1.3tn, respectively, for the nine months, signaling improved economic activities. The combined amount of N2.8tn is already above the prorated 9M 2021 budgeted N2.5tn for VAT and CIT in 2021 by 13.8%, so we expect 2021 performance for VAT and CIT to significantly outpace 2020 numbers of N2.8tn. We note the VAT increase to 7.5% became effective in February 2020, leaving only 1 month of lower VAT. Excluding any growth attributable to currency adjustments, we can safely conclude that some of the growth seen is largely due to improving macro-economic conditions.
