Clearly reflecting the challenging operating environment for the Nigerian manufacturing industry last year, exacerbated by the removal of fuel subsidy, devaluation of the naira and increase in electricity tariffs, manufacturing tax revenues fell sharply by 70.24 percent quarter-on-quarter to N43.2 billion in the first quarter of 2024 (Q1 2024), compared to N145.1 billion in the previous quarter (Q4 2023).
This is according to the National Bureau of Statistics (NBS) Corporate Income Tax (CIT) report for Q1 2024 on tax revenues of domestic and international manufacturing companies. The report also showed that tax payments by manufacturers in Q1 2023 fell 31.4 percent year-on-year to N62.9 billion.CIT, also known as Corporate Income Tax, is a tax levied by the government on the income of businesses.The tax rate is 0% for businesses with a total turnover of 25 million naira or less, 20% for businesses with a total turnover of between 25 million and 100 million naira, and 30% for businesses with a total turnover of more than 100 million naira.
A breakdown of the NBS report shows that out of the 21 sectors, manufacturing, once one of the largest tax earners, recorded the lowest growth rate.An analysis of CIT payments shows that manufacturers’ tax payments in the first quarter of 2024 accounted for 11.2% of the local CIT of NBS 386.5 billion for the quarter, compared to 27.2% of the local CIT of NBS 20.9 billion for the fourth quarter of 2023.
The NBS report states: “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 quarter-on-quarter basis, manufacturing had the lowest growth rate at -70.24 percent, followed by supply of electricity, gas, steam and air conditioning at -69.14 percent.”Muda Yusuf, CEO of the Centre for Promotion of Private Enterprises (CPPE), said the economy was not good for the manufacturing sector, which is usually a major contributor to tax revenues.
“Corporate tax is paid mainly by large companies such as multinationals and conglomerates, many of whom have suffered very large losses due to the exchange reform,” he noted.Segun Ajayi-Kadir, Executive Director of the Association of Nigerian Manufacturers (MAN), warned that 767 manufacturing companies will close in 2023 and the remaining 335 will face hardship due to the multifaceted challenges facing the sector.Last year, many multinational companies announced their withdrawal from the country citing an unfavourable business environment. These include Kimberly-Clark (KC), Procter & Gamble (P&G), GlaxoSmithKline Consumer (GSK) Nigeria, PZ Cussons, Equinor, Sanofi, Bolt Foods and most recently Diageo, which will withdraw from Guinness Nigeria.Moreover, some listed consumer goods makers reported heavy operating losses in the first quarter as rising interest rates and further devaluation of the naira increased borrowing costs.
