Goddy Egene writes that Dangote Cement continues to lead other listed companies to boost federal government’s revenues through corporate tax payments
There is no doubt that Nigerians and businesses operating in the country are very resilient. While there are many investment opportunities, few companies are encouraged to establish their businesses due to poor infrastructure and high cost of doing business among other factors.
It is believed that if the necessary infrastructure are put in place, more direct investments would be attracted to the country. With many companies operating profitably, employment would be created, dividends paid to shareholders while more money goes into government coffers as corporate tax.
However, despite the challenging operating environment, listed companies have been striving to beat the odds to remain in operations. Corporate results released for the year ended December 31, 2020, have shown that amidst the headwinds in the economy, some of the companies have contributed significantly to government’s revenue in the form of corporate tax.
This became obvious last week when Dangote Cement Plc announced its results, showing that it paid a corporate tax of about N97.2 billion. Further analysis showed that the pan-African cement manufacturing firm has paid N236.6 billion as tax in the last three years.
The payment which covers 2018, 2019 and 2020, amounts to a yearly average tax of N79 billion. During the three years, Dangote Cement Plc recorded a profit after tax of N867 billion, translating to an average profit of N287 billion a year.
Dangote Cement Plc is the clear leader in terms tax payment in spite of the fact it is not the best in terms of profitability. BUA Cement Plc, which became one of the leading cement manufacturing companies last year following merger of Cement Company of Northern Nigeria Plc and Obu Cement Plc, recorded a profit of N131.1 billion in 2019 and 2020. The firm posted an average profit of N65.5 billion in the last two years and paid a combined tax of N14.1 billion or an average tax of N7.1 billion.
Similarly, Lafarge Africa Plc, which recovered from losses in 2019, posted a combined profit of N46.3 billion in 2019 and 2020 and paid a tax of N6.7 billion in 2020. Nestle Nigeria Plc paid a tax of N21.426 billion in 2019, which was lower than the N25.4 billion in 2020.
Looking at the banking sector, it has also been a great contributor in terms of tax to government going by the figures of the some of the banks that have announced their audited 2020 results. However, compared to the manufacturing sectors, it lags behind.
About 11 banks paid a total of N123.3 billion in taxes even though they are said to be more profitable than the 10 manufacturing firms who paid a combined N157.17 billion in taxes in 2020.
But Zenith Bank Plc has paid a total of N81.8 billion as tax from 2018 to 2020, translating to an average tax of N27.3 billion year. The bank ended with a combined profit of N631billion and an average of N210 billion every year in the last three years.
In the same vein, Guaranty Trust Bank Plc has paid a tax of N102.3 billion from 2018 to 2020 or an average of N34.1 billion and posted a profit of N582.9 billion in three years, which amounts to N194.3 billion on yearly average.
Pan-African financial institution, United Bank for Africa Plc, has contributed a total of N68.5 billion to government coffers as corporate tax in the last three years, meaning that it has contributed an average of N23 billion every year. The bank has ended up making a profit of N281.5 billion in three years and an average of N93 billion a year, from where it recommended dividend for shareholders.
Stanbic IBTC Holdings Plc, which also released its results last week, has paid a total of N41.1 billion as tax in three years and made a profit of N234.6 billion in three years or N77.5 billion yearly average.
Analysts believe that if the government can improve the operating environment and make it more conducive for businesses to thrive, it will impact positively on its revenue as more profit would be made and more tax paid.
For Dangote Cement Plc to pay a whopping N97.2 billion as corporate tax, the firm recorded impressive performance, growing both its top and bottom-lines.
Dangote Cement sold 15.9Mt in 2020, including both cement and clinker sales, implying a 12.9 per cent growth above the 14.1Mt in 2019. Looking at the domestic sales alone, Nigerian operations sold 15.6 Mt, up by 14.3 per cent year on year and resulting in an increase in market share.
Revenues for the Nigerian operations increased by to N720 billion, owing to demand in the domestic market. The Nigerian business recorded a strong earnings before interest, taxes, depreciation and amortisation (EBITDA) of N421.4 billion indicating a margin of 59 per cent.
Commenting, Chief Executive Officer, Dangote Cement Plc, Michel Puchercos, said: “2020 was a good year for Dangote Cement across board. Several firsts made 2020 a productive year such as our maiden clinker shipment, maiden bond issuance and successful buyback programme. We increased our capacity by 3.0 Mt in Nigeria, inaugurated our two export terminals and inaugurated our gas power plant in Tanzania. All these were achieved whilst we focused on protecting our people, customers and communities from the impact of the pandemic.
“Dangote Cement recorded strong top-line growth supported by strong cement demand. Profitability was further bolstered by our disciplined cost control measures in what we believed to have been a highly inflationary and volatile year. These measures resulted in a profit after tax to N276.1 billion.
“Looking ahead, we have strengthened our alternative fuel initiative which focuses on leveraging the circular economy business model and reducing exposure of our cost base to foreign currencies fluctuations. We continue to embed Dangote Cement’s seven sustainability pillars into every aspect of our operation and culture.
“We remain committed to keeping safe our staff and communities by being fully compliant with health and safety measures in all our territories of operation. We are focused on adapting to the rapidly evolving markets in which we operate.”
The CEO said the company remained committed to keeping safe our staff and communities by being fully compliant with health and safety measures in all our territories of operation. We are focused on adapting to the rapidly evolving markets in which we operate.”
However, the tax paid by Dangote Cement did not come to some market stakeholders as a surprise given the commitment to tax payment.
The cement firm had said in its sustainability report for 2019 that as a responsible corporate citizen, it ensured timely compliance with tax regulations in all the countries where we operate.
“This commitment enables us to support socioeconomic development in the African continent. By paying our taxes responsibly and transparently, we support government’s plans for infrastructural development in our different markets. We also contribute towards the attainment of SDG 11 (Sustainable Cities and Communities). We report annually on our tax payments to governments. This way, we are transparent about how we manage our financial obligations,” it said.
Apart from boosting revenues of governments the countries where it operates, Dangote Cement has also been a large employer of labour on the continent.
“As the largest cement manufacturer in Nigeria, and one of the largest employers in Sub-Saharan Africa, we understand the challenges posed by the high rate of unemployment across the continent, particularly among the youth population. Throughout our operations, we have created jobs for thousands of Nigerians and Africans in nine other countries,” it said.
According to the company, aside from direct job creation, its activities support thousands of jobs in its supply chain, by way of indirect and induced impacts. “According to our 2019 socioeconomic impact assessment study specifically on our operations in Nigeria, Ethiopia, Senegal and South Africa, we sustained 54,005 jobs (direct, indirect, induced ) in these four markets in the year under review,” he said.