In 2020, Nigeria generated a total of ₦1.41 trillion as revenue from Company Income Tax (CIT). Of this figure, 56.09% came from the sectoral collection, 16.89% was e-payments, and 27.02% from foreign sources.
However, the country recorded a 13.35% decline in total CIT generated in 2020 when compared with 2019.
Likewise, while the Corporate Income Tax had been the highest source of tax revenue for the government, it was exceeded by Value Added Tax (VAT) in the year 2020, the first time in five years, according to data from the National Bureau for Statistics (NBS). The NBS reported a VAT of N1.53 trillion received by the government, surpassing a company income tax of N1.41 trillion for the same year.
This obvious decline in Nigeria’s CIT in 2020 finally exposed an incremental decline in its contributions to the overall tax revenue of the government over the years. Compared to VAT, CIT had been sliding down from 56.7% of VAT and CIT combined in 2016 to 56.2% in 2017 and 56.1% in 2018. It slid further down to 55.8% in 2019 before the conspicuous decline to 47.9% in 2020.
Also, going by the OECD tax classifications, in 2018, CIT amounted to 50% of the country’s tax revenues, above the five other tax categories. In that year, CIT contribution to Nigeria’s pool of tax revenues ranked far higher than the CIT contributions for an average African country, and that for Latin America and Caribbean countries, and the Organisation for Economic Co-operation and Development (OECD) countries.
The Company Income tax is a revenue sourced by the government from its levies on companies operating in the country. Currently, the government charges a 30% rate for CIT on companies’ profits assessed on the previous year’s performance. However, the minimum tax is applied when the company incurs a loss or has no tax payable.
Data from the Nigerian Bureau of Statistics (NBS) shows Nigeria generated ₦790.58 billion from all the country’s sectors. This signifies a 2.78% decline from that of 2019.
Likewise, CIT generated from foreign payments declined by 38.14% in 2020. According to the NBS, “Foreign payment are bulk payment (sic) from JP Morgan account which cannot be attributed to our offices or sectors.” However, the amount generated through e-transaction platforms increased by 20.28% by year-end.
CIT Analysis
| 2019 (B’N) | 2020 (B’N) | Difference | Percentage Difference | |
| Sectors | 813.1731 | 790.58 | -22.5931 | -2.78 |
| E-Payments | 197.9385 | 238.09 | 40.1515 | 20.28 |
| Foreign CIT Payment | 615.5173 | 380.77 | -234.7473 | -38.14 |
| Total | 1626.629 | 1409.44 | -217.189 | -13.35 |
Data reviewed shows that, based on sectoral returns, professional services and telecoms generated more CIT in 2020. It accounted for 12.78% of the total and 22.8% of the amount generated from sectors. Other manufacturing was next in the hierarchy as it made up 7.12% and 12.69% of the entire figure and sectoral figure respectively.
Mining activities in the country generated the least CIT in 2020. Textile and garment industry and Local Government Councils are the other two sectors before mining in the minor order. Analysis showed that these sectors accounted for less than 1% of the total CIT and the sectorally generated CIT. for mining, it was 0.02% and 0.04%, respectively.
While the austere impacts of COVID-19 could have contributed to the current decline in company income tax receipts, Nigeria’s overall tax revenue has always been low compared to its peers. Cross-country data sourced from the World Bank and the OECD report reveals that Nigeria’s tax as a ratio of its gross domestic product (GDP) ranks lowest when compared with its peers globally.
Nigeria can boost the tax revenue it generates from various sources through policies that encourage more local and foreign investments and improve the level of employment of its human resources.