In 3 months, Nigeria generated N1.53 trillion from corporate income tax; 10% VAT increases

In a study published on Monday, the National Bureau of Statistics (NBS) stated that Nigeria’s tax income collection increased significantly in the second quarter of 2023. According to the report, the Federal Government received N1.53 trillion from corporation income tax (CIT), a significant increase of 226.4% over the N469.01 billion obtained in Q1, 2023.

Additionally, the Value Added Tax (VAT) revenue for Q2 increased significantly from N709.59 billion in the prior quarter to N781.35 billion, representing a growth rate of 10.11%.

The new administration’s push to enhance government revenue through fiscal measures may not be unrelated to the jump in CIT collection, which went from N469.01 billion to N1.53 trillion in the course of one quarter. President Bola Tinubu established a council to review the nation’s tax laws and fiscal policies as soon as he took office in an effort to increase revenue collection and reduce borrowing.

Within the following three years, the government aims to reach a minimum tax-to-gross domestic product ratio of 18% while transforming the tax system to encourage sustainable development. Nigeria has one of the lowest tax revenue to GDP ratios in the world in 2021 at 10.9%, far below the 34.1% average among OECD members.

The government estimates that the measures might generate $26 billion in additional revenue, on top of the $10 billion in savings from last year’s elimination of the gasoline subsidy and other exchange rate limitations.

More information regarding the revenue figures

On a sectoral level, different industries saw different rates of growth in CIT contributions. Notably, the CIT growth rate for water supply, sewage, waste management, and cleanup activities was astoundingly high at 626.52%.

Activities related to lodging and food service are closely behind with a growth rate of 585.11%. The tourist and hotel industries have recovered significantly since the COVID-19 pandemic limitations that rendered them unusable in 2020 and 2021, which is a key factor in this large rise.

Contrastingly, the education industry saw a CIT collection loss of -15.48%, indicating potential difficulties or decreased profitability in the industry. The areas where government involvement or fiscal measures may be required to encourage economic activity and income creation include public administration, defense, and mandatory social security, all of which displayed a slight growth rate of 25.46%.

Tax revenue is dominated by manufacturing and ICT.

Manufacturing emerged as the major contributor to CIT revenues, accounting for 25.63% of the overall collection, according to the data on sectoral contributions. The performance of the manufacturing sector has continued to show how important it is to Nigeria’s economic situation and why the FG should concentrate on reviving the country’s productive economy.

Beyond the potential for job and wealth development, the sector is crucial to the country’s effort to diversify away from its reliance on oil. Additionally, it can assist Nigeria in reducing its reliance on imports, enhancing its trade balance, and performing better in the foreign exchange market.

The importance of the financial industry in generating tax income for the government was highlighted by the second-highest share, secured by financial and insurance activities with 24.47 percent. The consistent contribution of the financial sector is a result of continued banking and financial activity, such as lending, investing, and insurance services. Along with this, the nation’s thriving fintech sector has become one of its most important tech industries.

Information and communication made up 20.3% of the total CIT contributions, placing third overall. The quick development of telecommunications and technology services in Nigeria is to blame for the sector’s growth. Through the sale of licenses, the country has recently been able to generate some meaningful cash from the spread of 5G broadband.

Sectoral VAT contribution

Along with CIT, VAT revenues also had a favorable trend in Q2 2023. From N709.59 billion in Q1 to N781.35 billion in Q2, VAT income increased by 10.11%. This expansion shows that economic activity in the nation is ongoing, with both consumers and corporations continuing to make purchases and investments.

Manufacturing is the leading sector, contributing 29.64% of all VAT receipts, according to the sectoral breakdown of VAT contributions. ICT came in second place, contributing 21.19% of VAT receipts. With 11.18% of the overall VAT receipts, financial and insurance activities also made a substantial contribution.

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Samson Ayodeji

I am literally obsessed with technology. I love writing about the latest news in technology in different markets, segments and sectors across the world.

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