By Philemon Amos

In Q1 2023, Nigeria witnessed a significant decline of 37.79% in Company Income Tax (CIT) collections, with the total CIT dropping from N753.88 billion in Q4 2022 to N469.01 billion. The report by the country’s Bureau of Statistics highlights the challenges faced by businesses and raises concerns about the overall economic impact.

The financial and insurance activities sector experienced the highest growth rate in CIT, at 50.42%, followed by the construction sector at 42.32%. The key contributors to CIT in Q1 2023 were financial & insurance activities, manufacturing, and information and communication sectors. On the other hand, activities such as households and water supply, sewerage, waste management, and remediation activities had the lowest shares.

Specifically, water supply, sewerage, waste management, and remediation activities recorded the lowest growth rate at -69.38%, followed by other service activities at -60.13%. These figures indicate the varying performance of different sectors in terms of CIT contributions during the mentioned period.“In terms of sectoral contributions, the top three largest shares in Q1 2023 were financial & insurance activities with 22.94%; manufacturing with 20.91%; and information and communication with 11.89%.
“Conversely, the activities of households as employers, undifferentiated goods- and services-producing activities of households for own use recorded the least share with 0.01%, followed by water supply, sewerage, waste management, and remediation activities with 0.04%; and activities of extraterritorial organizations and bodies with 0.12%.”
They also added that on a year-on-year basis, CIT collections in Q1 2023 decreased by 14.96% from Q1 2022.

What contributed to the decline
The reduced Nigerian economic growth in the first quarter which has been attributed to the negative consequences of the Naira redesign is a major player as so many companies lacked the cash to make transactions in vital parts of the informal chain.

Nigeria’s Gross Domestic Product (GDP) grew by 2.31% year-on-year in real terms in the first quarter of 2023, indicating a 1.21% points lower than 3.52% recorded in the previous quarter and 0.8% lower compared to 3.11% recorded in the corresponding period of 2022.The Statistics Bureau blamed the slowdown in GDP growth rate on the naira scarcity which occurred in the first quarter of the year as the central bank refused to back down on its naira swap policy, they said:

“The reduction in growth is attributed to the adverse effects of the cash crunch experienced during the quarter.”