…As FG earned N4.03tn from tax in three months
By Charles Ebi
Nigerian manufacturing sector has witnessed a significant surge in tax contributions, reaching a nine-month high in the second quarter of 2024 despite ongoing economic challenges.
This is according to newly released data from the National Bureau of Statistics ,NBS.
In Q2 2024, the total tax paid by manufacturers, which combines both Company Income Tax ,CIT, and Value Added Tax ,VAT, amounted to N405.86 billion.
This represents an 84.1% increase from the N220.35 billion collected in Q1 2024 and a marginal 2.1% decrease compared to the same period in Q2 2023, when the total tax stood at N414.51 billion.
The CIT paid by the manufacturing sector in Q2 2024 saw a significant rebound, increasing to N221.97 billion.
This marks a 413.9% increase from Q1 2024, when the CIT collected was N43.17 billion.
However, despite this strong recovery, the CIT remains 15.5% lower than Q2 2023, where the CIT contribution reached N262.73 billion.
The VAT contributions in Q2 2024 also rose to N183.89 billion, reflecting a 3.8% growth from Q1 2024’s N177.17 billion.
When compared to Q2 2023, the VAT collections increased by 21.1%, up from N151.78 billion.
The data also shows that manufacturers contributed 8.99% of the total CIT and 11.78% of the total VAT in Q2 2024.
These contributions highlight the manufacturing sector’s critical role in Nigeria’s fiscal landscape, particularly as it emerged as one of the largest contributors for CIT and VAT in the quarter.
Nigeria’s manufacturing sector’s contribution to the Gross Domestic Product ,GDP, witnessed a significant contraction over the past two quarters, reflecting a decline of 20.95% from the end of 2023 to the second quarter of 2024.
This decline over the first half of 2024 highlights the sector’s vulnerabilities, particularly in the face of ongoing economic and infrastructural challenges.
Despite these challenges, the sector has remained a major contributor to government taxes.
The standard CIT rate in Nigeria is 30% of a company’s taxable profits for large companies (those with annual gross turnover of more than N100 million). Medium-sized companies (with turnover between N25 million and N100 million) are charged a CIT rate of 20%. Small companies (those with an annual turnover of less than N25 million) are exempt from CIT.
VAT in Nigeria is charged at a standard rate of 7.5%. It was increased from 5% in 2020 as part of government efforts to boost revenue.
These taxes form a substantial part of Nigeria’s overall revenue base and play a crucial role in funding the country’s economic development and public services.
Despite the upward trend, the sector’s CIT contribution has not yet returned to the peak levels seen in mid-2023, pointing to a need for continued policy reforms and economic stabilization efforts.
The slight dip in total tax collections compared to Q2 2023 indicated that while the manufacturing sector is recovering, external pressures such as inflation, foreign exchange volatility and high production costs might still be affecting overall profitability.
Last year, the Chief Consultant of B. Adedipe Associates Limited, Dr Biodun Adedipe, said that Nigerian manufacturers are confronted with about 74 different taxes from their factory to the market and down to the final consumer.
He also used the occasion to urge the Federal Government to do something about the ease of doing business to make the country more globally competitive.
The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele recently said that the committee has proposed an exemption of manufacturers and farmers from paying withholding tax as a way of reducing the tax burden on businesses.
Last month, the Director-General of Manufacturers Association of Nigeria ,MAN , Mr. Segun Ajayi-Kadir, criticized the multiple and high rates of taxes and levies imposed by the three tiers of government and their agencies.
Ajayi-Kadir noted that the challenges facing the manufacturing sector, particularly due to the current macroeconomic conditions, are exacerbated by the ongoing foreign exchange volatility and high electricity tariffs.
He also called on manufacturers to support the implementation of the recommendations from the Presidential Committee on Fiscal Policy and Tax Reforms.
In the same vein, the National Bureau of Statistics has said the federal government’s aggregate receipt from Value Added Tax and Companies Income Tax stood at N4.03tn in the second quarter of 2024.
It said from this amount, VAT revenue stood at N1.56tn while Companies Income Tax was N2.47tn.
The VAT figure indicates a growth rate of 9.11% on a quarter-on-quarter basis from the N1.43tn recorded in Q1 2024.
On a year-on-year basis, VAT collections in Q2 2024 surged by 99.82 per cent from Q2 in 2023.
The statistics hub said the Manufacturing, Information and Communication recorded an 11.78 and 9.02% contribution to the aggregate VAT collection and as such topped the list of contributors.
It added that mining and quarrying contributed 8.79% during the period under review.
On a quarter-on-quarter basis, human health and social work activities recorded the highest growth rate with 98.44%, followed by agriculture, forestry and fishing with 70.26% and water supply, sewerage, waste management and remediation activities with 59.75%.
According to NBS, activities of households as employers, undifferentiated goods and services-producing activities of households for own use recorded the least share with 0.00%, followed by activities of extraterritorial organizations and bodies with 0.01%; and water supply, sewerage, waste management and remediation activities with and Real Estate Services 0.04% each.
Recall that the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun had debunked claims suggesting plans to hike the current VAT rate from 7.5% to 10%.
The agricultural sector led the growth in Company Income Tax in Nigeria during the second quarter of 2024, recording a 474.50% increase on a quarter-on-quarter basis, according to the latest report from the National Bureau of Statistics released on Monday.
On the aggregate, CIT for Q2 2024 stood at N2.47tn, marking a 150.83% growth from N984.61bn in Q1 2024.
Local payments contributed N1.35tn, while foreign CIT payments accounted for N1.12tn during the period under review.
“Agriculture, forestry, and fishing recorded the highest growth rate at 474.50%, showcasing the sector’s increasing contribution to the national economy”,the report highlighted.
