Solid Growth in CIT Collections in Q1 2021


Tuesday, July 27, 2021 / 09:18 AM / by FBNQuest Research / Header Image Credit: FBNQuest

Today's chart is drawn from the company income tax (CIT) report by sectors for Q1 '21, produced by the National Bureau of Statistics (NBS) in conjunction with the Federal Inland Revenue Service (FIRS). The report reveals that total CIT collections increased 33% y/y to NGN392.8bn. Supportive of the double-digit y/y growth in CIT collections were the return to growth trajectory of some important sectors of the economy such as manufacturing, which expanded by 3.4% y/y in Q1 compared with a contraction of -1.5% in Q4 '20. This was reflected in the solid Q1 earnings performance reported across board by most of the non-financial names under our coverage. The sum represents gross CIT receipts for the federation, of which the federal government receives the majority.


In Q1, NGN152.3bn was collected locally, while NGN184.6bn was generated as foreign CIT payment. A category named others which includes CIT through electronic channels accounted for the balance of c.NGN55.9bn.


Zooming down on domestic CIT payments, the breweries and beverages sector generated the highest amount of CIT at NGN23.3bn. We recall that within the manufacturing sector the foods, beverages and tobacco segment posted the fastest GDP growth rate of 7.1% y/y in Q1 '21. Another notable sector is professional services, including telecoms which generated N18.2bn.


The Q1 CIT data imply an annualised (not adjusting for seasonality) amount of c.NGN1.57trn for 2021, which is roughly 11% more than the NGN1.4trn CIT generated in 2020. The first quarter tends to be the weakest, according to historical trends.


A separate data series on value-added-tax (VAT) produced by the NBS shows that VAT collections expanded by c.53% y/y to NGN496.4bn in Q1 '21.  The increase can be attributed to a 250bp increase in the applicable rate  to 7.5% in 2020. Unlike with CIT, the formula for the distribution from the VAT Pool favours the states rather than the FGN.


Nigeria's tax-to-GDP ratio at c.4% still lags its continental rivals like South Africa and Egypt whose ratios are c.29% and 17% respectively.


Some recommendations for boosting Nigeria's tax-to-GDP ratio include: i) a further increase in the VAT rate to bring it closer to the 15% rate used in other parts of the Economic Community of West African States (ECOWAS), ii) an expansion of the tax net to bring previously untapped segments of the economy on board, and iii) the rationalisation of tax exemptions.


Company income tax from domestic sources (N 'bn)

Proshare Nigeria Pvt. Ltd.

Sources: NBS; FBNQuest Capital Research


Proshare Nigeria Pvt. Ltd.


Related News

  1. FIRS Extends Deadline for Filing CIT Returns and Reconciliation of Unutilized WHT Credit
  2. FIRS Requires Taxpayers to File VAT and CIT Returns on the e-Filing Platform
  3. CIT Payments Improve to N392.8bn in Q1 2021
  4. N392.77bn Generated as CIT in Q1 2021 - NBS
  5. FIRS Directs Companies Operating Within Free Trade Zones To File Income Tax Returns
  6. FIRS Issues Public Notice on CIT Instalment Payment Application
  7. Year 2020: Narrow Sectoral Focus in CIT Payments
  8. Company Income Taxes Collections Declined in Q4 2020
  9. N295.72bn Generated as Company Income Tax in Q4 2020 - NBS
  10. CIT Payments Reflects Pressure on Economy Despite Q3 2020 Recovery
  11. N416.01bn Generated as Company Income Tax in Q3 2020 - NBS

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.
Related News