December 12, 2023/CSL Research

Based on data released by the National Bureau of Statistics (NBS), the federal government generated a total of N2.70tn in Company Income Tax (CIT) and Value Added Tax (VAT) in Q3 2023. This is an increase of 87.89% and 16.65% on the N1.44tn and N2.31tn recorded in Q3 2022 and Q2 2023 respectively. Specifically, CIT rose by 115.90% y/y to N1.75tn in Q3 2023 from N810.19bn in Q3 2022. Q/q, CIT rose by 14.27% from N1.53tn in Q2 2023.

Foreign CIT payments contributed 62.75%, growing significantly by 235.63% y/y to N1.1trn in Q3 2023 from N327.02bn in Q3 2022, while local payments contributed 37.25% rising by 34.87% to N651.63bn in Q3 2023 from N483.17bn in Q3 2022. In terms of sectoral contribution, the information & communications, manufacturing, and mining/quarrying were the highest contributors to CIT, contributing 26.18%, 23.90%, and 11.80% to the total CIT collections in Q3 2023.

On the other hand, Value Added Tax (VAT) increased by 51.60% to N948.07bn in Q3 2023 from N625.39bn in Q3 2022. Q/q, VAT rose by 21.34% from N781.35bn in Q2 2023.

This was also driven by the manufacturing, information & communications, and financial insurance activities, which contributed 26.51%, 19.04%, and 12.31% respectively to the total VAT collections in Q3 2023. Foreign VAT payments contributed 21.58% to the total VAT and increased by 67.89% y/y to N204.58bn while Local VAT contributed 44.93% to the total VAT payments, increasing by 41.90% y/y to N522.08bn. Import VAT contributed 23% increasing by 63.27% y/y to N221.41bn in Q3 2023.

We attribute the increase in taxes to the implementation of the new finance act in September 2023. The new finance act placed new taxes on some essential goods and services, including the imposition of a 5% levy on goods imported into Nigeria and all telecommunication services in the country. Also, the appointment of VAT collection agents has improved the country’s tax management, lowering the rate of default.

In our view, increases in tax collection bodes well for the country if it does not come from multiple taxations on individuals and businesses. The government should continue to widen the tax net through efficient collection efforts rather than burdening struggling businesses and individuals with multiple taxations.

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