Companies pay less tax in the first quarter of 2024 as economy worsens 

Story highlights

  • Company Income Tax (CIT) payments by companies in 14 out of 21 sectors of the economy declined in the first quarter of 2024.
  • Analysts attribute the decline in tax payment to macroeconomic malaise such as weakening naira, inflation, and others resulting in losses or reduction in profits.
  • Listed companies in manufacturing, telecoms and others see a drop in profits and in worse cases losses in Q1 2024 resulting in reduced or zero tax payments.

A review of the recently released Company Income Tax (CIT) report for the first quarter of 2024 reveals that income tax payment by companies in manufacturing, agriculture and 12 others declined by a minimum of 16%.  

In total, CIT payments by companies in 14 out of 21 sectors decreased during the first three months of the year, resulting in a 12.87% decline in CIT collection for the quarter. 

CIT, collected by the federal government, is levied on companies with a turnover of N25 million and above. The CIT rate is 20% for companies with a gross turnover between N25 million and N100 million, and 30% for companies with a gross turnover exceeding N100 million. 

The manufacturing sector experienced the largest decline in CIT payments to the federal government, plummeting by 70.24% from N145.06 billion in Q4 2023 to N43.17 billion in the period under review.

This was closely followed by the electricity, gas, and steam supply sectors, which saw a 69.14% decline in CIT payments from N16.83 billion to N5.19 billion. 

The agriculture sector recorded a 59.31% decrease in CIT payments, while the arts and entertainment sector saw a 56.19% decline. 

Other sectors with reduced CIT payments include; transport services (-45.49%), wholesale and retail trade (-39.66%), real estate services (-40.64%), other services (-52.47%), human health and social work (-16.20%), construction (-33.06%), accommodation and food services (-31.21%), education (-14.18%), information and communication (-6.88%), and professional, technical services (-13.68%). 

Reason for the decline 

The Director of the Centre for the Promotion of Public Enterprise (CPPE), Dr. Muda Yusuf attributed the decline to the macroeconomic malaise affecting the nation with respect to high inflation, exchange rate problems, high cost of inputs and others.  

According to him, “the decline in tax payment by companies means the economic situation is impacting on the fortunes of businesses. You know CIT is charged on your profit, so if you are not making much profit, your tax payment would be reduced.”  

“The present economic situation with forex, high inflation, and cost of production is unfriendly to businesses leading to reduction in sales, profit margins, reduced capacity utilisation and even closure of businesses. Some businesses have closed shop as a result of the unfriendly economic environment” 

Problems in the business sector during the quarter 

In the first quarter of the year, the FX rate tumbled to a record N1,500 to the USD while inflation reached 33.2% in March. This has resulted in declining revenues for businesses and in some cases closure of businesses.  

The Stanbic Purchasing Managers’ Index (PMI) for February fell to 51.1 in February from 54.5 in January as business managers complained of high input costs propelled by exchange rate weakness. Business owners during the month complained that input costs have risen to the highest in a decade.  

The problems in the business sector were exacerbated in March when the PMI remained unchanged as business owners complained that high prices following significant currency depreciation were dampening demand.  

Profit declines of listed companies in Q1, 2024 

A review of the financial performance of listed companies across various economic sectors revealed significant losses during the quarter, leading to a decline in tax payments. In the industrial goods sector of the manufacturing industry, Lafarge Cement and Beta Glass Plc reported lower tax payments in Q1 2024 compared to the same period last year. For Lafarge, Profit-After-Tax declined by 65% in Q1, while Beta Glass saw its PAT drop from N1.89 billion to N1.43 billion.  

The consumer goods sector was greatly impacted by the harsh economic climate as companies such as Cadbury, Dangote Sugar, International Breweries, Nigerian Breweries and others recorded losses during the period resulting in zero tax payments.  

Cadbury posted a loss of N7.3 billion in Q1 2024, down from a profit of N3.5 billion in the same period last year. Dangote Sugar recorded a loss after tax of N68.99 billion from a profit of N12.80 billion in Q1, 2023.

International Breweries continued its loss streak from N2.30 billion in Q1 2023 to a staggering N60.39 billion in Q1, 2024.  

Telecoms giant MTN Nigeria Plc saw a pre-tax loss of N575 billion in the first three months of 2024, from N162 billion recorded in the same period last year.

Its South African counterpart in the Pay TV industry, Multi Choice posted $190.5 million in forex losses from Nigeria. 

Impact on government revenues 

  • The reported decline in profits indicates that companies will pay reduced taxes, and in cases of reported losses, they may receive tax breaks, which can significantly impact government revenues. 
  • This impact is already evident, as the Federal Inland Revenue Service (FIRS) failed to meet its revenue target by N860 billion in the first quarter of the year.
  • The service generated N3.94 trillion out of a targeted N4.8 trillion, thereby falling further short of the annual target of N19 trillion. 


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