In apparent reflection of the harsh operating environment for the manufacturing sector in Nigeria over the past year, accentuated by fuel subsidy removal, naira devaluation and increase in electricity tariff, tax revenue from manufacturers dropped drastically by 70.24 percent, quarter-on-quarter (QoQ), to N43.2 billion in the first quarter of 2024 (Q1'24) from N145.1 billion recorded in the previous quarter (Q4'23).
This is contained in the Company Income Tax (CIT) Q1 2024 report by the National Bureau of Statistics (NBS) on the tax revenue from both local and foreign manufacturing companies.
The report also indicated a decline of 31.4 percent year-on-year (YoY) in tax payments by manufacturers compared with N62.9 billion recorded in Q1'23.
CIT, also known as corporate tax, is a levy imposed by the government on the income of a company. The rate is hinged on zero percent for companies with gross turnover of N25 million or less, 20 percent for companies with gross turnover greater than N25 million and less than N100 million, and 30 per cent for large companies above N100 million.
A breakdown of the NBS report revealed that out of 21 sectors, manufacturing activities which used to be one of the highest contributors to tax revenue recorded the lowest growth rate.
Analysis of the CIT payments shows that the tax payments by manufacturers in Q1'24 represented 11.2 percent of the local CIT of N386.5 billion in the quarter, compared to 27.2 percent of local CIT of N533.9 billion in Q4'23, and 20.9 percent of local CIT of N300.8 billion recorded in Q1'23.
The NBS report stated: "On the aggregate, CIT for Q1 2024 was reported at N984.61 billion, indicating a growth rate of -12.87 percent on a QoQ basis from 1.13 trillion in Q4 2023. Local payments received were N386.49 billion, while Foreign CIT payments contributed N598.13 billion in Q1 2024.
"On a QoQ basis, the activities of Manufacturing had the lowest growth rate with -70.24 percent, followed by Electricity, gas, steam and air conditioning supply with -69.14 percent."
Adducing reasons for this development, Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), said that the economy has not been favourable to manufacturers that normally contribute a lot to tax revenue, especially those in production.
"CIT is mostly paid by the major players like the multinationals and conglomerates. But many of them suffered very serious losses from the foreign exchange reform," he noted.
Recall that Director General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, had raised the alarm that 767 manufacturing companies shut down in 2023, while 335 others became distressed due to multidimensional challenges besetting the sector.
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Many multinationals announced their exit from the country over the past year, citing unfavourable business environment. They include Kimberly-Clark (KC), Procter & Gamble (P&G), GlaxoSmithKline Consumer (GSK) Nigeria, PZ Cussons, Equinor, Sanofi, Bolt Food, and lately, Diageo which announced its divestment from Guinness Nigeria Plc.
Also, some listed consumer goods manufacturing companies reported big operational losses in the first quarter as borrowing costs swelled on the back of rising interest rates and a further devaluation of the naira.
