The recently released Q3-2022 Company Income Tax (CIT) report by the National Bureau of Statistics (NBS) revealed that company income tax receipts totalled N810.2bn, rising 71.5% y/y and 13.4% q/q in Q3-2022. In addition, Foreign CIT Payments printed at N327.0bn (+306.8% y/y & +61.4% q/q) and accounted for 40.4% of total receipts.
 
Local CIT payments declined significantly in Q3-2022 by 23.8% q/q to N483.2bn, with CIT receipts for 14 out of 21 sectors declining on a q/q basis. In the Q3-2022, a combination of factors weighed on companies’ performances. The high inflationary environment and persistent naira depreciation affected margins (for context, in Q3-2022 at parallel market, the Naira fell to as low as N800/$).  Furthermore, the hawkish stance of the Central Bank of Nigeria (CBN) resulted in the Monetary Policy Rate (MPR) printing at 15.5% at the end of Q3-2022, which effectively increased borrowing costs for companies.
 
In addition, the Federal Government gave tax holidays to players in specific sectors, such as Agricultural companies, reducing tax receipts. In the future, as pressures from underlying economic impediments persist, companies’ performance will continue to be affected in the short and medium term, further dampening tax receipts. However, the Tax Administration continues making strides to improve taxation efficiency in the country. Recently the Senate passed a bill for a second reading to amend the Federal Inland Revenue Service (FIRS) Act to regulate the processes of granting corporate tax holidays, import duty waivers and investment incentives to investors and businesses in Nigeria. The bill seeks to whittle down the powers of the Federal Government to grant tax holidays and incentives to businesses unilaterally.