RipplesMetrics: Nigeria pulls N8.54 trillion as taxes from VAT, CIT in 2023

A report by the National Bureau of Statistics indicated that Nigeria grew its taxes collected from consumption products and organizations by 59.8 per cent in the space of one year.

Going by this, the country generated a combined total of N8.54 trillion from Value Added Tax and Company Income Tax in 2023.

According to the bureau’s report, this is a growth of N3.19 trillion when compared to the N5.34 trillion generated in 2022 but this might still be relatively low compared to what the country needs to run the economy.

The significance of these taxes helps in the revenue generation for the country and the long-run contributes significantly to the country’s Gross Domestic Product. Also, revenue collection helps to sustain the country’s fiscal demands, especially in budget appropriation.

The market still struggles with economic policies initiated by the president since he assumed office in May 2023, which might have contributed to lowering the GDP to 2.74 per cent in 2023. For instance, the removal of fuel subsidies, devaluation of the naira and several unstable monetary policies in 2023 contributed to increasing the inflation and exchange rate in the Nigerian trade market.

While food products and transportation prices have skyrocketed in the past few months, several production organizations, including GSK Pharmaceuticals, have closed down operations. These challenges might affect revenue generation in the coming quarters if the policies are not softened.

Also, for 2024, the president signed an appropriation budget of N28.7 trillion which may run more on deficit due to the low revenue generation.

Recall that, last year, the president set up a committee with a plan to boost the tax-to-GDP to at least 18 per cent within the next three years. The goal of the committee was to enhance the collection efficacy and reduce the challenges facing business growth within the country.

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The breakdown

Data collected from 21 sectoral economic classifications showed that Nigeria generated N4.90 trillion as CIT and N3.64 trillion as VAT for 2023.

Most revenue, generated from CIT, was pulled from Manufacturing, Information and Communication, Financial and insurance activities and Mining and quarrying. The data revealed that this is about 36.5 per cent of the total amount generated in 2023.

On the other hand, the highest contribution to VAT came from Manufacturing, Information and Communication, Mining and quarrying and Financial and insurance activities which was 40.3 per cent of the total amount generated in 2023.

Although included in the classification, the data shows that for 2023, the government generated low revenue, both in VAT and CIT, from Water supply, sewerage, waste management and remediation activities as well as the Activities of households as employers, undifferentiated goods- and services-producing activities of households for own use sector.

The data also showed that while the federal government increased its revenue collected through VAT every quarter in 2023, the revenue from CIT dropped in the fourth quarter.

According to the data, from Q1 to Q4, Nigeria generated N709.59 billion, N781.32 billion, N948.07 billion and N1.20 trillion across all quarters respectively for VAT. However, for revenue from CIT, the country pulled, in the first three quarters, N469.01 billion, N1.55 trillion, and N1.75 trillion respectively and dropped to N1.13 trillion in Q4 2023.

By: James Odunayo

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