• Q3 performance tumbles by 28 per cent
• Drop will affect revenue projection in new year, says Muda Yusuf
 
Despite the rising headwinds with some companies closing shops, the government earned a total of N5.22 trillion from company income tax (CIT) in the first nine months of the year.
 
The figure represents a 39.3 per cent improvement in the performance of last year’s comparative period.  In the first three quarters of last year, CIT earnings  were  N3.75 trillion.
 
The country has seen a challenging year with some companies closing operations while the Manufacturing Association of Nigeria (MAN) gave a damning report about the first half (H1) performance.
 
Yet, the National Bureau of Statistics (NBS) said the country earned N984 billion in the first quarter of 2024, a 109.93 per cent increase over the N469 billion the country earned in the corresponding quarter period in 2023.
  
In the second quarter of 2024, the CIT rose to N2.47 trillion, a 150.83 per cent increase from the first quarter of 2024 and N1.14 trillion over and above N1.53 trillion collections in the same quarter in 2023.
  
The CIT, however, declined significantly quarter-on-quarter to N1.77 trillion in the third quarter of 2024 but only marginally above the N1.75 trillion in the same quarter in 2023.
  
The country also collected N386.49 billion from local payments and N598.13 billion from foreign payments in the first quarter of 2024 as against the N300.78 billion from local payments while foreign payments slumped to N168.23 billion in the first quarter of 2023.
  
In the second quarter of 2024, local payments received were N1.35 trillion, while foreign CIT payments contributed N1.12 trillion. This was an improvement over the N1.02 trillion collected as local CIT in the second quarter of 2023 while for foreign CIT collections in the second quarter of 2023, the figure was N505.91 billion.
  
In the third quarter of 2024, the local and foreign CIT collections were N920.91 billion and N852.29 billion respectively. Though local CIT collection in the third quarter of 2024 experienced a decline from the second quarter figure, it was still higher than the N651.63 billion received as local CIT payments in the same quarter in 2023, while foreign CIT payments contributed N1.1 trillion, in the same quarter in 2023 .
  
Stakeholders believe the increased collections from CIT in 2024 could be linked to the improved revenue collection adopted by the Federal Inland Revenue Service (FIRS) in its bid to achieve the N19.4 trillion revenue target.
  
Behind the exceptional performance of CIT is a tale of woe by the private sector operator. For one, the Manufacturers Association of Nigeria (MAN) whose members are the greatest casualties has picked holes in the report.
  
It stated that the real sector, which is the second largest and largest employer of labour, declined by 1.66 per cent year-on-year in the first half of 2024, falling to N1.34 trillion from N1.36 trillion in H1 2023.
  
The sector experiences many challenges ranging from rising electricity tariffs, exchange rate volatility and  expensive alternative energy costs, which increased production costs amid declining consumer demand.
  
There has also been a sharp rise in interest rates, multiple taxes and levies among others, all of which have contributed to forcing many players out of business, while others have cut down on operations in a bid to stay afloat.
  
The sector also experienced a high level of unsold finished products inventory which surged by as high as 357.57 per cent year-on-year, reaching N1.24 trillion in H1 2024. This alarming increase has been attributed to declining consumer purchasing power due to escalating inflation, arising from subsidy removal and Naira devaluation.
  
Job creation fell by 37.83 per cent, reflecting the challenges within the sector, including economic uncertainties, inflationary pressures, and an unfavourable business environment.
 
Nominal growth also dropped from 36.59 per cent to 32.97 per cent, driven by high inflationary pressure and the exit of major multinational manufacturing companies. The sector’s contribution to GDP in Q3 2024 dropped to 8.21 per cent, compared to 8.42 per cent recorded in Q3 of 2023 and lower than the 8.46 per cent recorded in Q2 2024.

The implication is that while the CIT may have grown, it is not certain that the growth lacks the deep-rooted development that Nigeria’s economy needs at this critical time to stay afloat.
  
Reacting to this development, the Chief Executive Officer (CEO) of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, expressed concern that this significant drop in CIT for Q3 would affect revenue projection for 2024 as this shortfall was not accounted for in the budget.
  
He said this is happening because companies and businesses are dealing with many challenges. According to him, “Companies are folding up or leaving and the government must look into this to prevent even more revenue deficit in 2025.”
  
On his part, business and policy analyst, Dr Vincent Nwani, pointed out that the drop is extremely worrisome, reiterating that it is however not unexpected because if companies are making losses, folding up or exiting the economy as has been witnessed this year, they cannot pay taxes.  He added that Q4 does not hold much hope as several companies have folded up or left the economy in the last three months.
  
“Smaller companies are folding up while multinationals are leaving,” he said, adding, “I think the true figure is way more than what is being declared and we would see what Q4 brings. Looking deeper at the situation, this drop means more unemployment, and less CSR and community initiatives. The reason companies are bleeding is clear, from N450/$1 to what we have now at almost N1700/$1.”
  
He said patronage of products and services has dropped because consumers are poorer.
“The minimum wage at N30,000 was $142, now at N70,000, which they have not even started paying yet, is about $42. So that means we are poorer than when the minimum wage was less than what it is now.”
  
He added that while government revenue has been compensated by gains from subsidy removal and FX gains, companies are taking the heat.
  
“If a country wants to grow, it is by how well the companies are doing, how many people they employ and how they can pay taxes. This is a significant indicator and a bad one at that. Companies’ ability to pay taxes has dropped because companies are experiencing losses, but the proposed tax reforms are not even addressing this.”
  
Predicting that the deficit would significantly worsen if nothing were done, he said bringing in new companies to pay taxes would be difficult because would-be entrepreneurs are wary of the economic crisis. “We must go back to the drawing board and do a proper reform from a holistic view if we intend to turn this number around in Q1 of 2025,” he said.