Boost in Federal Government’s Earnings from Financial and Insurance Activities

The National Bureau of Statistics has recently disclosed that the Federal Government amassed a substantial N388.25 billion as Company Income Tax (CIT) from financial and insurance activities in the first nine months of 2023. This figure reflects a significant 138.12 per cent increase from the N163.05 billion generated in the same period of 2022.

CIT is a tax imposed on a company’s profits from all sources. Resident companies are liable to CIT on their worldwide income, while non-residents are subject to CIT on their Nigeria-source income. The CIT rate stands at 30 per cent for large companies, assessed on a preceding year basis.

Further analysing the NBS data, it is apparent that the Federal Government garnered N69.01 billion, N250.77 billion, and N68.47 billion as CIT from financial and insurance activities in Q1, Q2, and Q3 of 2023 respectively. Additionally, statistics indicate that CIT from these sectors has been consistently increasing since 2015, with only minor decreases in 2020 and 2021 due to the Covid-19 crisis.

The uptrend persists, as financial and insurance activities yielded N208.93 billion as CIT in 2022, a notable rise from N110.93 billion generated in 2015. This substantial growth also underscores the resilience of Nigerian financial institutions, particularly banks, which have consistently delivered strong results notwithstanding economic challenges and regulatory pressures.

In an illustrative instance, the top ten commercial banks listed on the Nigerian Exchange Limited experienced a 7.11 per cent year-on-year increase in their combined Profit After Tax (PAT) to N1.06 trillion in 2022. Consequently, they collectively paid N260.3 billion as CIT in 2022, reflecting a 28 per cent growth from the previous year.

It is noteworthy that the N388.25 billion generated from financial and insurance activities in Q3’2023 accounted for 22.2 per cent of the total CIT generated by the Federal Government in that period. The NBS also reported that sectors such as Information and Communication, Manufacturing, and Mining and Quarrying contributed more CIT compared to financial and insurance activities in the third quarter of 2023.

The growth in CIT from various sectors is manifested in the NBS statement that “On the aggregate, Company Income Tax (CIT) for Q3’23 was reported at N1.75 trillion, indicating a growth rate of 14.27 per cent on a quarter-on-quarter basis from N1.53 trillion in Q2’23.”

In response to the country’s fiscal challenges, President Bola Tinubu established a tax committee aimed at bolstering revenue generation and curbing excessive borrowing. With the increase in CIT earnings from financial and insurance activities, it appears that the government’s efforts are yielding positive results.

The rise in CIT from these sectors is a testament to the resilience of Nigerian businesses and the effectiveness of fiscal policies. As the country seeks to further improve revenue generation, the upward trajectory of CIT collections will undoubtedly play a pivotal role in achieving this goal.