September 10, 2024/CSL Research

The latest CIT report from the National Bureau of Statistics (NBS) shows a substantial increase in Company Income Tax collections for Q2 2024. The CIT for this quarter reached N2.47 trillion, marking a 59.52% y/y increase from N1.55 trillion in Q2 2023. This growth is even more pronounced on a q/q basis, with Q2 2024 CIT collections up by 150.83% to N2.47 trillion compared to N984.621 billion in Q1 2024. The report highlighted that local CIT payments contributed N1.35 trillion, an increase from N1.02 trillion in Q2 2023. Additionally, foreign CIT payments saw a substantial rise, contributing N1.12 trillion in Q2 2024, compared to N523.28 billion in Q1 2023. The windfall gains made by some banks and improved profitability in sectors such as agriculture and construction contributed to the growth seen.

The devaluation of the naira has significantly boosted the value of foreign payments, contributing to the overall increase in Company Income Tax (CIT) collections. The Federal Inland Revenue Service (FIRS) imposes CIT at a rate of 30% on company profits. In Q2 2024, the top three sectors contributing to CIT were financial and insurance services, accounting for 15.53% of total CIT, manufacturing at 8.99%, and information and communication at 7.84%.

Despite growth in certain sectors, many businesses are struggling with rising operational costs and high inflation, which are eroding profit margins and reducing taxable income. Additionally, the devaluation of the exchange rate has led to significant foreign exchange (FX) losses, further impacting profitability.

Taiwo Oyedele, the chairman of the Presidential Fiscal Policy and Tax Reforms Committee (PFPTRC), announced that the Committee has recently recommended the harmonisation of taxes and levies collected by the three tiers of government into eight categories. This proposed streamlining aims to modernize and simplify tax administration, making it more efficient, adaptive, and conducive to economic growth. The harmonised list of taxes and levies includes income tax, property tax, Value Added Tax (VAT), customs duties, excise tax, stamp duties, special levies, and harmonised levies.

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