In the face of binding constraints, the manufacturing sector in Nigeria attracted a tax revenue of over N626.21 billion into the government coffers in the first half of 2024 (H1'24).
Nigerian manufacturers have been contending with high cost of production and declining demands accentuated by poor infrastructure, lack of access to funds or high lending rates, fuel subsidy removal, naira devaluation, increase in electricity tariff, and galloping inflation, amongst others.
Emphasizing the unfavourable business environment, 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 nation's manufacturing sector.
However, in an indication of the resilience of the nation's manufacturing sector, available data from the National Bureau of Statistics (NBS) shows that manufacturers paid a total of N626.206 billion in taxes, made up of N265.143 billion Company Income Tax (CIT) and N361.063 billion Value Added Tax (VAT) in H1'24.
This represents a 3.21 percent year-on-year (YoY) increase over N606.738 billion combined collections, comprising N325.634 billion CIT and N281.104 billion VAT, in the same period in 2023 (H1'23). It also indicates an increase of 4.70 percent compared with the combined tax revenue of N598.073 billion, made up of N300.783 billion CIT and N297.290 billion VAT, in the second half of 2023 (H2'23).
The NBS report indicates that the manufacturing sector is one of the largest contributors to CIT and VAT, highlighting its significance in driving tax revenues amidst economic uncertainties.
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As a matter of fact, NBS data revealed that the sector paid the highest VAT and the second highest CIT, only behind the Financial and Insurance sector, in Q2'24. Overall, the manufacturers contributed 8.99% of the total CIT and 11.78% of the total VAT in Q2'24, underscoring the sector's critical role in Nigeria's fiscal landscape.
The increased tax revenue from the manufacturing sector is however in contrast to the declining growth of the sector. For instance, the Q2'24 NBS GDP report shows that the growth of the manufacturing sector fell to 1.28 percent from 2.2 percent in Q2'23 and 1.5 percent in Q1'24.
The report also revealed that the sector's real contribution to GDP declined to 8.46% from 8.62% in Q2'23 and 9.98% in Q1'24, which further underscores the sector's struggles to maintain its share of the economy amidst growing challenges.
