As revenue from oil continues to drop, tax has become a viable alternative for the government to generate revenue to enhance growth and development in Africa’s largest economy. In 2022, according to data released by the National Bureau of Statistics, the Federal Government amassed about N5.32 trillion from both company tax and value added tax. Revenue from tax outpaced earnings from oil in 2022 by 41.2 percent, as total income from oil in 2022 stood at N2.19 trillion. BAMIDELE FAMOOFO writes.
Government’s revenue from oil is declining. For the whole of financial year 2022, revenue from oil stood at N2.19 trillion. It recorded a decline of 64.3 percent compared to revenue earned in 2021.
The Federal Government’s share of oil revenues stood at N586.7billion, accounting for about 27 percent of total oil revenue which accrued to the most populous black nation in the world in the review period.
Commenting on the nation’s dwindling oil revenue, Bismarck Rewane, Chief Executive Officer, Financial Derivatives Company Limited, said the country faces the twin problems of oil theft and a lack of political will to remove oil subsidies, hence in 2022, oil production averaged 1.2mbpd, 28.14 percent below 2022’s budget estimate of 1.67mbpd.
He noted that oil subsidies totaled more than N6 trillion, ten times the Federal Government’s share of oil revenues in 2022 (N586.7 billion).
“The Russian-Ukraine war increased energy prices. Brent crude climbed to a near decade high of $127.23pb at its peak in May, while LNG prices spiked by 22.8 percent. The oil price boom supported revenues for oil exporting and producing countries, except Nigeria. For example, Middle East and Central Asian countries earned a combined surplus of $843 billion (as reported by the IMF) in 2022. This led to a miracle economic growth in Saudi Arabia (8.7%)—the highest level in four years, and Kuwait (7.9%)”
Rewane lamented the failure of the government to take advantage of the ongoing war between Russia and Ukraine to boost revenue from oil. “The Russian-Ukraine war increased energy prices. Brent crude climbed to a near decade high of $127.23pb at its peak in May, while LNG prices spiked by 22.8 percent. The oil price boom supported revenues for oil exporting and producing countries, except Nigeria. For example, Middle East and Central Asian countries earned a combined surplus of $843 billion (as reported by the IMF) in 2022. This led to a miracle economic growth in Saudi Arabia (8.7%)—the highest level in four years, and Kuwait (7.9%),” he said.
But while income from oil is declining due to continuing oil subsidy payment amid dwindling oil production, revenue from tax appears to be a veritable alternative for the government to keep the wheels of economic progress running.
During the financial year ended 2022, figures from Company Income Tax and Value Added Tax grew to N5.32 trillion on the aggregate.
CIT is a tax imposed on the profit of a company from all sources. The rate of tax is 30 percent of the total profit of a company. Some profits are exempted from CIT provided they are not derived from trade or business activities carried out by the company e.g. Cooperative society.
On the other hand, VAT is a consumption tax paid on goods and services supplied in Nigeria other than goods specifically excluded under the Value Added Tax. It is currently charged at the rate of 7.5 percent.
The breakdown of tax contribution showed that company income tax stood at about N2.81 trillion in 2022 while VAT printed about N2.51trillion in the review financial year.
Analysis of the performances of CIT and VAT in 2022 showed that tax revenue increased on a quarter-on-quarter basis except in the last quarter when tax revenue from companies recorded a decline.
Quarter on quarter performance on CIT in 2022
On the aggregate, company income tax for Q1 2022 was reported at N532.48 billion, a growth rate of 53.09 percent on a quarter-on-quarter basis from N347.81billion in Q4 2021.
Local payments recorded were N209.13 billion in Q1 2022, while foreign CIT payment contributed N323.35 billion. On a quarter-on-quarter basis, the activities of extraterritorial organizations and bodies recorded the highest growth rate with 60.61 percent, followed by Education with 39.76 percent, and Construction with 38.98 percent.
On the other hand, activities of households as employers, undifferentiated goods- and services-producing activities of households for own use had the lowest growth rate with – 79.94 percent, followed by accommodation and food service activities with -51.07 percent. In terms of sectoral contributions, the top three largest shares in Q1 2022 were manufacturing with 21.31 percent, Information and communication with 14.03 percent, and Financial and insurance with 12.20 percent. Conversely, the activities of households as employers, undifferentiated goods- and services-producing activities of households for own use recorded the least share with 0.02 percent, followed by Activities of Water supply, sewerage, waste management and remediation with 0.19 percent, and Activities of extraterritorial organizations and bodies with 0.34 percent. However, on a year-on-year basis, CIT collections in Q1 2022 increased by 35.61 percent from Q1 2021.
CIT for Q2 2022 was reported at N714.40 billion, indicating a growth rate of 29.53 percent on a quarter-on-quarter basis from N551.53 billion in Q1 2022.
Local payments received were N634.01 billion, while Foreign CIT payment contributed N80.39 billion in Q2 2022. On a quarter-on-quarter basis, the Activities of accommodation & food services recorded the highest growth rate with 481.93 percent, followed by Information & communication with 430.67 percent, and Transportation & storage with 339.08 percent. On the other hand, activities of extraterritorial organizations & bodies had the lowest growth rate with – 42.59 percent, followed by activities of households as employers, undifferentiated goods and services-producing activities of households for own use with -31.80 percent. In terms of sectoral contributions, the top three largest shares in Q2 2022 were manufacturing with 27.55 percent; Information & communication with 24.56 percent, and Financial & insurance with 14.98 percent. Conversely, the Activities of households as employers, undifferentiated goods and services-producing activities of households for own use recorded the least share with 0.004 percent, followed by Activities of extraterritorial organizations & bodies with 0.07 percent; and Water supply, sewerage, waste management & remediation activities with 0.12 percent. However, on a year-on-year basis, CIT collections in Q2 2022 increased by 51.34 percent from Q2 2021.
On the aggregate, company income tax for Q3 2022 was reported at N810.19 billion, indicating a growth rate of 13.41 percent on a quarter-on-quarter basis from N714.40 billion in Q2 2022. Local payments received were N483.17 billion, while Foreign CIT Payment contributed N327.02 billion in Q3 2022.
On a quarter-on-quarter basis, the Arts, entertainment, and recreation activities recorded the highest growth rate with 93.33 percent, followed by Agriculture, forestry, and fishing with 75.38 percent. On the other hand, Accommodation and food service activities had the lowest growth rate with – 64.81 percent, followed by Water supply, sewerage, waste management, and remediation activities with -64.75 percent.
In terms of sectoral contributions, the top three largest shares in Q3 2022 were manufacturing with 28.76 percent; Information and communication with 27.31 percent; and Financial & insurance with 8.81 percent. Conversely, the Activities of households as employers, undifferentiated goods- and services-producing activities of households for own use recorded the least share with 0.003 percent, followed by Water supply, sewerage, waste management, and remediation activities with 0.05 percent; and Activities of extra-territorial organizations and bodies with 0.11 percent. However, on a year-on-year basis, CIT collections in Q3 2022 increased by 71.46 percent from Q3 2021.
In Q4 2022, aggregate income tax from companies stood at N753.88 billion, indicating a growth rate of -6.95 percent on a quarter-on-quarter basis from N810.19 billion in Q3 2022. Local payments received were N353.90 billion, while Foreign CIT Payment contributed N399.98 billion in Q4 2022. On a quarter-on-quarter basis, the Water supply, sewerage, waste management and remediation activities recorded the highest growth rate with 57.40 percent, followed by Activities of households as employers, undifferentiated goods- and services-producing activities of households for own use with 45.19 percent. On the other hand, Information and communication activities had the lowest growth rate with – 65.75 percent, followed by Arts, entertainment and recreation activities with -64.09 percent. In terms of sectoral contributions, the top three largest shares in Q4 2022 were Manufacturing with 31.20 percent; Financial & insurance activities with 12.96 percent and Information and communication activities with 12.77 percent.
Conversely, the Activities of households as employers, undifferentiated goods- and services producing activities of households for own use recorded the least share with 0.01 percent, followed by Water supply, sewerage, waste management, and remediation activities with 0.12 percent; and Activities of extraterritorial organizations and bodies with 0.14 percent. However, on a year-on-year basis, CIT collections in Q4 2022 increased by 116.75 percent from Q4 2021.
Quarter on quarter performance on VAT in 2022
On the aggregate, value added tax for Q1 2022 was reported at N588.59 billion, a growth of 4.41 percent on a quarter-on-quarter basis from N563.72 billion in Q4 2021. Local payments recorded were N344.04 billion in Q1 2022, while foreign VAT payment contributed N117.99 billion.
On a quarter-on-quarter basis, the activities of extraterritorial organizations and bodies recorded the highest growth rate with 469.32 percent, followed by Water supply, sewerage, and waste management and remediation activities with 47.62 percent. On the other hand, Agriculture, forestry and fishing had the lowest growth rate with –31.04 percent, followed by Real estate activities with –18.74 percent.
In terms of sectoral contributions, the top three largest shares in Q1 2022 were manufacturing with 32.84 percent; Information and Communication with 17.10 percent; and Mining and Quarrying with 11.85 percent. Conversely, Activities of households as employers, undifferentiated goods- and services-producing activities of households for own use recorded the least share with 0.04 percent, followed by Activities of extraterritorial organizations and bodies with 0.08 percent; and Water supply, sewerage, waste management and remediation activities with 0.16 percent. However, on a year-on-year basis, VAT collections in Q1 2022 increased by 18.58 percent from Q1 2021.
“Analysis of the performances of CIT and VAT in 2022 showed that tax revenue increased on a quarter-on-quarter basis except in the last quarter when tax revenue from companies recorded a decline”
Value Added Tax for Q2 2022 was reported at N600.15 billion, showing a growth rate of 1.96 percent on a quarter-on-quarter basis from N588.59 billion in Q1 2022. Local payments recorded were N359.12 billion, while Foreign VAT Payment contributed N111.13 billion in Q2 2022. On a quarter-on-quarter basis, Electricity, gas, steam and air conditioning supply recorded the highest growth rate with 116.47 percent, followed by Accommodation and food service activities with 42.44 percent. On the other hand, Activities of extra-territorial organizations and bodies had the lowest growth rate with –42.39 percent, followed by activities of households as employers, undifferentiated goods- and services-producing activities of households for own use with –36.57 percent. In terms of sectoral contributions, the top three largest shares in Q2 2022 were manufacturing with 33.08 percent; Information and communication with 18.98 percent; and Mining & quarrying with 10.60 percent. Conversely, activities of households as employers, undifferentiated goods- and services-producing activities of households for own use recorded the least share with 0.03 percent, followed by Activities of extraterritorial organizations and bodies with 0.05 percent; and Water supply, sewerage, waste management and remediation activities with 0.13 percent. However, on a year-on-year basis, VAT collections in Q2 2022 in-creased by 17.16 percent from Q2 2021.
Value Added Tax for Q3 2022 rose to N625.39 billion, showing a growth rate of 4.21 percent on a quarter-on-quarter basis from N600.15 billion in Q2 2022. Local payments recorded were N367.93 billion; Foreign VAT Payments were N121.85 billion, while import VAT contributed N135.61 billion in Q3 2022. On a quarter-on-quarter basis, the Arts, entertainment, and recreation supply activities recorded the highest growth rate with 61.09 percent, followed by activities of extraterritorial organizations and bodies with 44.47 percent. On the other hand, Activities of households as employers, undifferentiated goods- and services-producing activities of households for own use had the lowest growth rate with –56.37 percent, followed by Water supply, sewerage, waste management, and remediation activities with –32.02 percent. In terms of sectoral contributions, the top three largest shares in Q3 2022 were manufacturing with 31.08 percent; Information and communication with 18.52 percent; and Mining & quarrying with 10.95 percent. Conversely, Activities of households as employers, undifferentiated goods- and services-producing activities of households for own use recorded the least share with 0.01 percent, followed by Activities of extraterritorial organizations and bodies with 0.06 percent; and Water supply, sewerage, waste management, and remediation activities with 0.08 percent. However, on a year-on-year basis, VAT collections in Q3 2022 increased by 24.95 percent from Q3 2021.
On the aggregate, VAT stood at N697.38 billion in Q4, 2022, showing a growth rate of 11.51 percent on a quarter-on-quarter basis from N625.39 billion in Q3 2022. Local payments recorded were N408.12 billion; Foreign VAT Payments were N159.83 billion, while import VAT contributed N129.43 billion in Q4 2022. On a quarter-on-quarter basis, the Arts, entertainment, and recreation activities recorded the highest growth rate with 43.82 percent, followed by Human health and social work activities with 35.82 percent. On the other hand, Agriculture, forestry and fishing had the lowest growth rate with –30.12 percent, followed by activities of extraterritorial organizations and bodies with –19.81 percent.
In terms of sectoral contributions, the top three largest shares in Q4 2022 were manufacturing with 32.17 percent; Information and communication with 18.05 percent; and Public administration and defence, compulsory social security with 9.87 percent. Conversely, activities of households as employers, undifferentiated goods- and services-producing activities of households for own use recorded the least share with 0.01 percent, followed by activities of extraterritorial organizations and bodies with 0.05 percent; and Water supply, sewerage, waste management, and remediation activities with 0.07 percent. However, on a year-on-year basis, VAT collections in Q4 2022 increased by 23.71 percent from Q4
2021.
