For the first time in the nation’s history, income from taxes saved the day. Accounts for over 70 percent of revenue generated from non-oil revenue in 2020.

For Nigeria, the outbreak of the covid-19 pandemic succeeded in shutting down international flights, borders and even day to day economic activities for a period but it did not shut down the flood gate of revenue coming into the tax regime.

Taking an inventory of the foregone year, it was discovered that monies generated from the duo of Value-added Tax, VAT and Company Income Tax, CIT accounts for a whooping ₦2.94 trillion making it the highest source of non-oil revenue. The figure is about 10 per cent higher than the ₦2.68 billion recorded the previous year.

Taking a deeper perspective, the two taxes experienced a massive uptick during the third quarter of 2020. A breakdown shows that the sum of ₦840.7 billion was generated in Q3, 2020 while ₦620 billion was generated Q1,2020, the least quarterly performance, was recorded in Q1,2020.

It is important to note that VAT accounted for ₦1.53 trillion or 52 percent of the total figure while ₦1.41 trillion was sourced from CIT. The CIT income is 13.5 per cent short of the ₦1.63 trillion generated from the same source in 2019.

CIT Breakdown

The 2020 CIT income was distributed accordingly: local companies (₦50.5 billion), foreign CIT payment (₦380.8 billion), and others (₦238.1 billion).

Professional services (including telecoms) and banks/other financial institutions led last year’s CIT revenue drive with N180.3 billion and N96.4 billion respectively. While banks and other financial institutions’ contribution to the CIT fell by about 48 percent (compared to N142.7 billion realised from the sector in 2019), professional service improved slightly, rising from N177.7 billion generated from the sector in 2019 to N180.3 billion.

Other top contributors to CIT incomes are other manufacturing (₦80.2 billion), commerce and trading (₦65.6 billion), breweries, bottling and beverages (₦53.2 billion), state ministries and parastatals (₦49 billion), transport and haulage (₦45.5 billion), oil-producing (₦40.8 billion) and federal ministries and parastatals (₦22.5 billion).

The laggards were the textile and garment industry (₦360 million), mining (₦343.2 million), local government councils (₦1.1 billion), chemicals, paints and allied industries (N2 billion) and publishing, printing and packaging (₦2.1 billion).

Textile and garment recorded highest year-to-date (YTD) improvement with 100 per cent jump in its CIT generation while the contribution of petrochemical and petroleum refineries fell by 45 per cent YTD to top the least improved sectors.

VAT Breakdown

In the fourth quarter, the country generated ₦454.7 billion from VAT, making it the top-performing quarter. The first quarter was the poorest with ₦324.6 billion. The pattern was different from that of 2019, when the Q2 topped the year followed by the fourth and then first.

Recall that VAT was increased from five per cent to 7.5 per cent as contained in the Finance Act 2019. The increase took effect on February 1, 2020.

According to sectoral analysis sourced from the NBS data, the government received ₦763 billion from non-import (local) VAT, ₦420.4 billion from non-import (foreign) VAT and ₦347.7 billion from the Nigeria Customs Service (NSC)-import VAT.

Professional service recorded ₦162.3 billion to emerge as the top contributing sector followed by other manufacturing with ₦154.2 VAT revenue. Mining recorded N251 million to take the least position in terms of value addition to VAT revenue.

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