NIGERIA generated a total of N864.7 billion revenue from company income (CIT) taxes in the first half H1) of the year, the highest in recent history.
The amount is 24 per cent higher than N697.7 billion generated in last year’s corresponding period. It is also a decent performance compared with the nine per cent yearly improvement since 2015. In the six years, CIT revenue expanded three years and contracted equally in three years.
Analysis of data supplied by the National Bureau of Statistics (NBS) shows that Nigeria has alternated between increasing and declining CIT in the crucial H1. In H1 2016, the figure declined by six per cent, from N791.7 billion recorded the preceding corresponding period to N514.8 billion. A 24 per cent improved performance followed in 2017.
The same circle (or a trap if you see the trend as blight on the public revenue) repeated itself from 2019 till this year. As it is, 24 per cent has become the blue just as six per cent is the unfortunate red. But one can only hope that this is a blip. If twice truly mean a pattern as it is often said, we could expect another contraction (or precisely -6 per cent growth) in H1 2022 CIT revenue.
Something is interesting about Nigeria, recession and CIT, looking at the trend lines. When Nigeria rose from the 2016 recession, it posted a CIT revenue increase of 24 per cent in H1 2017. Coming out of the 2020 recession, that has repeated one more.
But on a more serious note, the improved CIT revenue may have suggested, other things being equal, that the economy is improving. Simply put, the companies are making more money, rising from the ruins of the COVID-19 pandemic. Otherwise, it is indicative of increasing efficiency in tax administration.
With a tax revenue to gross domestic product (GDP) ratio of about four per cent, Nigeria is among the worst-performing countries in tax collection and administration.
On sub-Saharan Africa’s index, it is dwarfed by South Africa’s 28.6 per cent, Egypt’s 15.2 per cent, Kenya’s 18.1 per cent and Ghana’s 17.6 per cent. On the global ranking, only Kuwait, Iraq and Saudi Arabia whose petrodollar revenue profiles are unrivalled are worse than the country.
The Director-General of the Budget Office of the Federation, Dr. Ben Akabueze, recently blamed the country’s poor budgeting and low infrastructure spending on the miserable revenue credential. The World Bank and its sister International Monetary Bank (IMF) have called on the country to engage in tax revenue to reverse the trend with the former stressing that yearly N10 trillion tax revenue is a possibility.
The Q2 2021 CIT is revealing the country’s historical aneamic economic growth, which is a cause and effect of poor planning. This is short of saying the country cannot plan with uncertainty because of the wide gap between reality and forecast incomes and that the growth is unstable as a result of bad planning especially on the part of the public sector.
The latest figures underscore the resilience of the economy in this trying time. They are also revealing of priority, reliability and more importantly the emerging sectors.
Mining, for one, posted N12.5 billion in the referenced quarter, which is fair in comparative terms and consideration of its peculiar challenges. Mining and agriculture are the most affected sectors by the only insecurity challenges.
Against all odds, the sector’s CIT contribution increased by 30,000 per cent year-on-year. Doesn’t this say anything about what could happen if the current artisanal approach to mining changes? Artisanal mining, which the Asian merchants are currently exploring to their advantage using local fronts, is essentially exempted from taxes.
The input of the old horse, oil-producing, suspiciously contracted by about four per cent year-on-year. This defies expectation as the international oil market has been bullish since the beginning of the year. Then gas, which has received much attention as a potential engine of the new growth, pulled through the three months with a 30,000 per cent increase in CIT.
Of the general performance, NBS says: “The sum of N 472.07 billion was generated as CIT as against N392.64bn generated in Q1 2021 and N402.03 billion generated in Q2 2020 representing 20.23 per cent increase Quarter-on-Quarter and 17.42 per cent increase year-on-year. Professional services generated the highest amount of CIT with N130.09 billion generated and closely followed by other manufacturing which generated N87.27 billion, banks and financial institutions generated N60.01 billion while textile and garment industry generated the least and closely followed by automobiles and assemblies and pioneering with N27.23 million, N62.15 million and N64.30 million generated respectively.
“Out of the total amount generated in Q2 2021, N412.74 billion was generated as CIT locally while N51.61 billion was generated as foreign CIT payment. The balance of N2.72bn was generated as CIT from other payments.”
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