Foreign companies have contributed significantly more to Nigeria’s tax revenue; in only a single year, the amount nearly doubled.
The devaluation of the naira has probably contributed to this substantial fiscal gain by raising the value of local currency in overseas transactions for non-import (foreign) Value Added Tax (VAT) and overseas Company Income Tax (CIT) payments.
Nigeria’s revenue from foreign-related Value Added Tax (VAT) increased by 61% to N824.6 billion in 2023, according to the most recent data from the National Bureau of Statistics (NBS). This represents a huge increase from N510.8 billion in 2022.Â
Of more significance is the increase of 107% in Corporate Income Tax (CIT) from foreign firms, from N1.14 trillion in 2022 to N2.38 trillion in 2023.
The total tax revenue collected from these sources increased from N1.66 trillion in 2022 to N3.21 trillion in 2023, a 93% increase.
The country’s finances would benefit from the boost in tax revenue, but it also emphasizes how vulnerable the Nigerian economy is to fluctuations in foreign exchange rates.
The weakening of the naira has contributed greatly to the recent increase in tax revenues. Although this is good news for the near term, it may conceal deeper weaknesses in the economic system.
Nigeria collected N4.9 trillion in Company Income Tax (CIT) in 2023, a 73.14% increase in revenue. This impressive increase highlights the substantial impact that foreign companies have on the Nigerian economy; foreign CIT accounts for approximately half of this amount, or 49%.
However, the Value Added Tax (VAT) receipts presented a somewhat different image. The effect of foreign companies on VAT was not as significant as it was in the CIT industry, although it was still significant. Twenty-three percent of the total VAT collected in 2023—N3.64 trillion—came from foreign sources.
This financial picture makes clear how important foreign companies are to supporting Nigeria’s tax collection, particularly in the CIT area.
