December 13, 2023/FBNQuest Research
According to the National Bureau of Statistics (NBS) recent data on company income tax (CIT), total CIT collections into the federation’s account increased by 14% q/q to NGN1.8trn. On a y/y basis, it more than doubled y/y. Underscoring the marked rise in CIT receipts was a significant increase in foreign CIT collections to NGN1.1trn compared to the NGN505.9bn and NGN327.0bn in Q2 ’23 and Q3 ‘22, respectively. The data is compiled by the NBS from data provided by the Federal Inland Revenue Service (FIRS).
In contrast, domestic CIT collections, which accounted for 37% of the total CIT receipts, declined by -36% q/q to NGN651.6bn. However, on a y/y basis, it was up by 35% y/y.
The lower CIT collections from companies in Nigeria during the quarter reflect the challenging operating environment being faced by businesses in the country.
Driving the q/q drop in domestic CIT receipts were marked q/q declines in sectors such as activities of households as employers, financial and insurance activities, water supply, sewerage, and waste management activities, which decreased by 74% q/q, 73% q/q, 73% q/q, respectively.
With respect to sectoral distribution, the information and communications sector was the largest source of revenue contribution to the domestic CIT collections, amounting to NGN170.6bn, or c.26% of total domestic CIT receipts.
CIT revenue from the manufacturing sector ranked second at NGN155.7bn, representing c.24% of domestic CIT collections and c.9% of total CIT receipts.
CIT collections from the mining and quarrying sector was the third-largest contributor to CIT receipts at NGN77.3bn or 12% of domestic CIT revenue.
Currently, the CIT rate in Nigeria is 30% for large companies with gross revenue greater than NGN100m), while the CIT rate is 20% for companies with gross revenue greater than NGN25m and less than NGN100m. However, for companies with a gross revenue of NGN25m or less, the CIT rate is 0%
Looking ahead, we believe the government’s efforts to enhance tax administration and collection efficiency will increase revenue collection into the government coffers.
