June 15, 2022/United Capital Research

As expected, the recent Company Income Tax (CIT) report published by the National Bureau of Statistics (NBS) revealed an increase in the amount of revenue generated in Nigeria through CIT in Q1-2022. According to the data, a total of N532.5bn was generated in Q1-2022, a 53.1% q/q increase from the N347.8bn generated in Q4-2021 and a 35.6% y/y increase from N392.7bn generated in Q1-2021. The growth in company tax collected appears to show fruits of the recently amended Company Income Tax law as part of the 2021 Finance Act which became effective Jan-2022. In addition, it reflects sustained post-pandemic recovery in economic activities underpinned by stronger consumer demand.

Analyzing the data further, foreign CIT payments amounted to N323.4bn and local payments amounted to N209.1bn making up 60.7% and 39.3% respectively, of total CIT numbers. Foreign CIT payments recorded a 263.5% q/q increase and a 175.3% y/y increase while local payments declined by 19.2% q/q but increased 37.3% y/y. The surge in Foreign CIT collections was broadly down to the extension of coverage of Non-Resident Companies (NRC) with significant economic presence in Nigeria. On a quarter-on-quarter basis, most sub-categories (within the local collection segment) recorded a decrease in CIT reported, with amounts generated by Activities of Households as employers and Accommodation & food service activities declining the most by 79.9% and 51.1% respectively. Surprisingly, Construction and Education numbers increased by 39.0% q/q and 39.8% q/q respectively, with Activities from extraterritorial organizations and bodies increasing the most by 60.6% q/q.

Looking forward, we remain bullish on CIT collections in FY-2022. The NRA coverage expansion continues to drive strong collections, softening the impact of weaker local CIT collections. In addition, we anticipate local collections will improve as the economy sustain the impressive growth it started the year with.