CIT Payments Reflects Pressure on Economy Despite Q3 2020 Recovery

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Friday, November 27, 2020 / 11:53 AM / by CSL Research / Header Image Credit: Business NH  


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Yesterday, the National Bureau of Statistics (NBS) published data on the collection of Company Income Taxes (CIT) from 2015 to the first nine months of 2020. Total CIT collections for 9M 2020 was N1.1tn, declining 11.9% y/y compared with the N1.3tn collected in 9M 2019. In Q3 2020 standalone, CIT collections amounted to N416.0bn showing a modest 3.5% recovery from Q2 2020's N402.0bn but lags Q3 2019's N520.9bn by 20.1%. We think the recovery in Q3 2020 is largely reflective of gradual removal of covid-19 restrictions which spurred recovery in economic activities in Q3 2020. Nevertheless, the y/y weakness in Q3 2020 and 9M 2020 CIT collections reflects year long pressures from the pandemic as well as slowing economic activities.

 

Across sectors, collections remained relatively weak with the recovery in Q3 2020 largely driven by surge in collections via electronic channels (E-Transact, E-Tax pay & Remitta). Payments via electronic channels grew 99.9% y/y in Q3 2020 standalone and 222.3% q/q from Q2 2020. We consider the growth in electronic collections hugely impressive considering significant efforts put into digitising the tax collection process. We note that payments via these channels were not grouped into sectors which makes sectorial comparism difficult. Nevertheless, based on the classifications made available by NBS, Other Manufacturing (+126.5% q/q), Commercial & Trading (+54.6% q/q), and Oil Marketing (+182.7% q/q) contributed the most to the recovery in collections while Banks & Financial Institutions (-50.9% q/q), Transaport & Haulage Services (-76.4% q/q) and Professional Services (-13.0% q/q) were the biggest laggards.

 

Furthermore, we also highlight that CIT collections form a key part of non-oil revenue for the Federal government. Thus, the decline reflected in collections clearly contributes to the government's weakening fiscal strength amidst weaker oil production and lower y/y oil prices. Thus, in our few, efforts should be concentrated on improving the Nigerian business environment to ameliorate some of the long standing bottlenecks that has dragged business profitability and consequently CIT collections.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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