ABUJA, Nigeria – The National Bureau of Statistics, NBS, reported a significant rise in corporate tax contributions in the second quarter (Q2) of 2024, with both local and foreign companies paying over N2 trillion to the federal government.
According to the latest company income tax (CIT) report, local companies contributed N1.35 trillion in Q2, a remarkable jump from the N386.49 billion recorded in the previous quarter.
Meanwhile, foreign companies added N1.12 trillion to Nigeria’s tax revenue, marking an 87.2% increase from the N598.13 billion collected in Q1.
The agricultural sector emerged as the highest contributor to the CIT, showing a 474.50% increase from the previous quarter.
The report highlighted that “agriculture, forestry, and fishing recorded the highest growth rate with 474.50%, followed by financial and insurance activities with 429.76%, and manufacturing with 414.15%.”
On the opposite end, the activities of households as employers and undifferentiated goods- and services-producing activities for household use saw a decline, recording a growth rate of -30.22%, while activities of extraterritorial organizations and bodies dropped by -15.67%, according to the report.
The Q2 figures reflect a massive 249.2% surge in tax payments by local companies, underscoring a significant contribution from Nigerian firms to the country’s tax revenue.
The CIT, or corporate tax, is charged on the profits of companies operating in Nigeria under the Companies Income Tax Act (CITA) and is enforced by the Federal Inland Revenue Service (FIRS).
The current CIT rate is 30% for companies with a turnover exceeding N100 million, and 20% for firms with turnover between N25 million and N100 million.
A Decade of Corporate Tax Growth
Over the past decade, corporate tax contributions in Nigeria have shown a fluctuating but upward trend. Between 2015 and 2024, the country has accumulated N20.68 trillion in CIT.
In 2015, the federal government collected N1.38 trillion, a figure that dropped to N1.02 trillion in 2016.
However, collections rebounded in 2017, reaching N1.24 trillion, and continued to rise in subsequent years, hitting N1.42 trillion in 2018 and N1.63 trillion in 2019.
In 2020, the pandemic brought a dip in CIT collections to N1.41 trillion, but tax revenue bounced back to N1.69 trillion in 2021.
The upward trend continued in 2022, with a collection of N2.83 trillion, and by 2023, Nigeria saw its highest CIT collection yet, totaling N4.89 trillion.
Local Firms Outpacing Foreign Contributions
Historically, local companies have consistently contributed more to CIT than foreign firms. In 2015, foreign firms contributed N715.52 billion, slightly more than the N645.68 billion from local firms.
However, by 2016, local companies took the lead, contributing N620.78 billion compared to the N360.23 billion from foreign firms.
This trend has continued, with local firms consistently paying higher CIT than their foreign counterparts in subsequent years.
In 2023, local firms paid N2.51 trillion, while foreign firms followed closely with N2.39 trillion.
The data from the first half of 2024 suggests this trend will persist, with local firms contributing N1.74 trillion and foreign firms N1.72 trillion so far, indicating that both sectors are on track for another record-breaking year.
As the Nigerian government continues to depend on corporate tax revenue to fund its operations, the significant growth in tax contributions from both local and foreign firms provides a much-needed boost to the nation’s economy.
