How Nigeria’s Tax Earnings Fell by 26% in Q4 2021

Raheem Akingbolu

The decrease in Nigeria’s earnings from Company Income Tax (CIT) for Q4 2021 by 26.39 per cent on a quarter-on-quarter (Q-o-Q) basis from N472.52 billion in Q3 2021, was as a result of decreases in collections in some critical sectors of the economy, the National Bureau of Statistics (NBS) has said.

According to the NBS, the critical sectors include; administrative and support service activities (-72.15 per cent); agriculture, forestry and fishing (-34.52 per cent); arts, entertainment and recreation (-25.31 per cent); education (-1.61 per cent); financial and insurance activities (-5.52 per cent); information and communication (-4.33 per cent); manufacturing (-23.21 per cent); and mining and quarrying (-7.56 per cent).

According to the bureau’s report for February 2022, Nigeria’s earnings from Company Income Tax (CIT) for Q4 2021 stood at N347.81 billion, a decline by 26.39 per cent on a quarter-on-quarter basis from N472.52 billion in Q3 2021.
Giving a breakdown of the income, the bureau indicated that local payments recorded were N258.85 billion, while Foreign CIT Payment contributed N88.96 billion.

Meanwhile, it has been further elucidated that irrespective of the above, positive growth was recorded in some other sectors.

“On a quarter-on-quarter basis, positive growths were recorded in accommodation and food service activities (116.01%); activities of extraterritorial organizations and bodies (128.92%); activities of households as employers, undifferentiated goods and services-producing activities of households for own use (563.56%); construction (33.32%); electricity, gas, steam, and air conditioning supply (84.68%); human health and social work activities (31.47%); other service activities (37.28%); professional, scientific and technical activities (51.47%); public administration and defense, compulsory social security (29.46%); real estate activities (17.99%); transportation and storage (2.04%); water supply, sewerage, waste management and remediation activities (26.08%); and wholesale and retail trade, repair of motor vehicles and motorcycles (13.91%), ”the report stated.

In terms of sectoral contributions, the top three largest shares in Q4 2021 were information and communication (N51.05 billion) with 19.72 per cent; manufacturing (N45.09 billion) with 17.42 per cent; and financial and insurance activities (N31.06 billion) with 12.00 per cent. Conversely, activities of households as employers, undifferentiated goods- and services-producing activities of households for own use (N189.45 million) with 0.07 per cent; water supply, sewerage, waste management and remediation activities (N328.58 million) with 0.13 per cent; and activities of extraterritorial organizations and bodies (N447.01 million) with 0.17 per cent were top three lowest shares in Q4 2021.

This notwithstanding, on a year-on-year basis, CIT collections in Q4 2021 increased by 17.61 per cent from Q4 2020.

However, experts have established that another factor affecting Nigeria’s revenue is the continuous payment of fuel subsidy, which gulps a significant portion of the country’s income. To this end, it has further been stated that it has become imperative for Nigeria to improve its non-oil revenue in order to compensate for its oil revenue underperformance.

Although the decline recorded in the fourth quarter is worrisome, 2021 as a whole is a record-making year in terms of collection of company income taxes for Nigeria.