The Federal Government’s revenue from company income tax declined by 37.79per cent in the first quarter (Q1) 2023, falling from N753.88 billion to N469.01 billion. Local payments accounted for N300.78 billion, while foreign company income tax payments contributed N168.23 billion during the period under review.
The decline in this aspect of non-oil revenue collections raises concerns about the economic impact and challenges faced by businesses in Nigeria, attributed to factors such as the Naira redesign policy and cash crunch experienced in the first quarter. As a result Nigeria’s Company Income Tax experienced a significant decline of 37.79per cent on a quarter-on-quarter basis, plunging from N753.88 billion in Q4 2022 to N469.01 billion in Q1 2023.
According to the National Bureau of Statistics (NBS), local payments accounted for N300.78 billion, while foreign Company Income Tax (CIT) payments contributed N168.23 billion during the same period. This decline in CIT collections raises concerns about the economic impact and challenges faced by businesses in Nigeria. On the aggregate, CIT for Q1 2023 was reported at N469.01 billion, indicating a growth rate of -37.79per cent on a quarter-on-quarter basis from N753.88 billion in Q4 2022, the NBS report said.
“Local payments received were N300.78 billion, while Foreign CIT Payment contributed N168.23 billion in Q1 2023. On a quarter-on-quarter basis, the financial and insurance activities recorded the highest growth rate with 50.42 per cent, followed by construction with 42.32 per cent.”
The NBS report further said that in terms of sectoral contributions, water supply, sewerage, waste management, and remediation activities recorded the lowest growth rate at – 69.38 per cent, followed by other service activities at -60.13per cent.
“In terms of sectoral contributions, the top three largest shares in Q1 2023 were financial & insurance activities with 22.94 per cent; manufacturing with 20.91 per cent; and information and communication with 11.89per cent. Conversely, the activities of households as employers, undifferentiated goods- and services-producing activities of households for own use recorded the least share with 0.01per cent, followed by water supply, sewerage, waste management, and remediation activities with 0.04 per cent; and activities of extraterritorial organisations and bodies with 0.12per cent.”
They also added that on a year-on-year basis, CIT collections in Q1 2023 decreased by 14.96per cent from Q1 2022. Reduction in Nigeria’s economic growth in Q1 2023, which has been attributed to the negative consequences of the Naira redesign policy of the CBN, was a major contributor. This is because so many companies lacked the cash to make transactions in vital parts of the informal chain. Nigeria’s Gross Domestic Product (GDP) grew by 2.31per cent year-on-year in real terms in the first quarter of 2023, indicating a 1.21per cent points lower than 3.52per cent recorded in the previous quarter and 0.8per cent lower compared to 3.11per cent recorded in the corresponding period of 2022. The NBS blamed the slowdown in GDP growth rate on the Naira scarcity which occurred in Q1 of the year as the central bank refused to back down on its Naira swap policy. The reduction in growth is attributed to the adverse effects of the cash crunch experienced during the quarter.