The Company Income Tax (CIT) collections for the first quarter of 2024 stood at N984.61 billion, which represents a 12.87 per cent decline compared to the N1.13 trillion collected in Q4 2023.
This is according to a report by the National Bureau of Statistics (NBS), in collaboration with the Federal Inland Revenue Service (FIRS), released on Tuesday.
Detailed Breakdown of CIT Contributions
- Local Payments: N386.49 billion
- Foreign CIT Payments: N598.13 billion
Despite the quarterly decline, some sectors showed significant growth, while others experienced substantial decreases.
The activities of households as employers, undifferentiated goods, and services-producing activities of households for their own use recorded the highest growth rate of 330.42 per cent. This was followed by administrative and support service activities, which grew by 33.18 per cent.
Conversely, the manufacturing sector experienced the steepest decline with a 70.24 per cent decrease, followed closely by electricity, gas, steam, and air conditioning supply, which fell by 69.14 per cent.
Sectoral Contributions to CIT Revenue
The sectors contributing the largest shares to CIT in Q1 2024 were:
- Mining and Quarrying: 20.94 per cent
- Financial and Insurance Activities: 18.73 per cent
- Information and Communication: 12.56 per cent
At the lower end, the activities of households as employers, undifferentiated goods, and services-producing activities for their own use accounted for the smallest share at 0.02 per cent, followed by water supply, sewerage, waste management, and remediation activities at 0.07 per cent, and activities of extraterritorial organizations and bodies at 0.24 per cent.
Year-on-Year Growth
On a year-on-year basis, the total CIT collection in Q1 2024 showed a remarkable increase of 109.93 per cent compared to Q1 2023, indicating a doubling of revenue within a year.
Analysis: Key Drivers and Sectoral Dynamics in CIT Collection
The mixed performance in CIT collections for Q1 2024 highlights several underlying factors and trends:
- Economic Fluctuations: The quarter-on-quarter decline of 12.87 per cent suggests some economic volatility. The previous quarter’s high base could be attributed to specific one-off payments or exceptional economic activities that did not recur in Q1 2024.
- Sector-Specific Variations:
- Household Employers and Administrative Services: The extraordinary growth in CIT from households as employers and administrative services might reflect increased formalisation and better compliance within these sectors.
- Manufacturing and Utilities Decline: The sharp declines in manufacturing and utilities indicate challenges in these industries, possibly due to high operational costs, supply chain disruptions, or reduced demand.
- Foreign Contributions: The significant share of foreign CIT payments (N598.13 billion) underscores the importance of multinational corporations and foreign investments in Nigeria’s tax revenue framework.
Sectoral Contributions and Economic Implications
- Mining and Quarrying: Leading the CIT contributions, this sector’s performance is crucial for sustaining government revenue, especially given its volatility and dependency on global commodity prices.
- Financial and Insurance Activities: The strong contribution from this sector highlights its resilience and the critical role of financial services in the economy. Maintaining regulatory stability and fostering financial inclusion will be key to supporting this sector.
- Information and Communication: The notable contribution from this sector reflects the ongoing digital transformation and the growth of the tech industry. Policies promoting innovation and digital infrastructure development will further boost this sector.
Challenges and Opportunities
While the overall year-on-year growth is promising, the quarterly decline signals the need for addressing sector-specific challenges. The manufacturing sector, in particular, requires targeted interventions to enhance competitiveness and reduce operational bottlenecks.
Furthermore, the significant contributions from foreign CIT payments highlight the importance of creating a favourable business environment to attract and retain foreign investments. Ensuring transparent and consistent tax policies will be essential to sustaining investor confidence.
The CIT report for Q1 2024 presents a mixed yet optimistic picture. The robust year-on-year growth reflects a recovering and expanding economic base, while the quarter-on-quarter decline points to areas needing attention and improvement. Continued efforts to enhance tax compliance, support key economic sectors, and address sector-specific challenges will be vital for sustaining and enhancing revenue growth.
As the Nigerian economy navigates its recovery phase, maintaining a balanced approach towards encouraging business growth, ensuring tax compliance, and fostering a favourable investment climate will be crucial for long-term economic stability and growth.