KEY POINTS

• Nigeria’s tax revenue from foreign companies increased 44% year-on-year to N2.57 trillion, highlighting intensified fiscal compliance measures and enforcement.
• VAT revenues climbed 157% year-on-year to N1.28 trillion, reflecting strong consumption tax performance despite economic headwinds.
• Currency devaluation and inflation challenged corporate earnings, impacting foreign firms’ profitability, with some reporting outright losses.

Nigeria’s tax revenue from foreign companies climbed 44 percent year-on-year to N2.57 trillion ($1.7 billion) in the first nine months of 2024, according to data from the National Bureau of Statistics (NBS). The increase reflects the government’s intensified efforts to bolster fiscal revenues through enhanced compliance and enforcement measures.

This marks a sharp rise from the N1.79 trillion ($1.2 billion) collected during the same period in 2023, underscoring Nigeria’s strategy to leverage tax revenues as a buffer against widening fiscal deficits.

Foreign firms propel CIT and VAT growth

According to Leadership, the latest Company Income Tax (CIT) report by the NBS highlights a mixed quarterly performance. CIT revenue from foreign firms jumped 42.49 percent from N598.1 billion $386 million) in the first quarter to N1.12 trillion ($724 million) in Q2, before retreating to N852.3 billion ($550 million) in Q3, reflecting mounting economic pressures.

Nigeria’s Federal Inland Revenue Service (FIRS) applies a 30 percent tax on corporate profits and a 7.5 percent VAT on goods and services. Multinational tech giants like Google, Netflix, and Meta are among the key contributors, remitting taxes on their digital and streaming services under Nigeria’s aggressive tax compliance regime.

Currency devaluation hits corporate earnings

Despite the surge in tax receipts, foreign companies operating in Nigeria are grappling with significant headwinds. 

The naira’s sharp devaluation has eroded corporate earnings, with some firms reporting outright losses. Streaming platform Netflix, for example, has seen a drop in subscriptions as inflation weakens consumer spending power, cutting into discretionary expenses.

VAT collections show stellar growth

Despite this growth in tax revenues, several companies’ financial performance has been adversely affected by the devaluation of the naira, which has eroded earnings and, in some cases, resulted in losses.

VAT revenues have also seen impressive gains, soaring 157.03 percent year-on-year to N1.28 trillion ($827 million) in the nine months through September 2024, up from N498.3 billion ($322 million) in the prior year. On a quarterly basis, VAT revenue stood at N435.7 billion ($281.6 million) in Q1, dipped to N395.7 billion ($257 million) in Q2, and rose again to N448.9 billion ($290.5 million) in Q3, underscoring resilience in consumption taxes amid economic uncertainty.

Nigeria’s fiscal shift towards taxation

In total, combined foreign tax contributions from CIT and VAT reached N3.85 trillion ($2.5 billion) in the first nine months of 2024, a 68.1 percent increase from the N2.29 trillion ($1.5 billion) recorded during the same period last year.

The sharp rise highlights the Nigerian government’s increasing reliance on tax revenues from multinational corporations to close fiscal gaps. While this underscores progress in revenue mobilization, broader economic challenges, including currency volatility and inflation, continue to weigh on corporate profitability and consumer spending.

The numbers reflect both the promise and pitfalls of Nigeria’s growing tax base as it navigates economic turbulence.