In a recent report released by the National Bureau of Statistics (NBS), Nigeria’s revenue from foreign-related value added tax (VAT) witnessed a substantial increase, rising by 61 percent to N824.6 billion, up from N510.8 billion in 2022.
This surge is attributed to the weakening of the naira, which elevated the local currency’s value of foreign transactions for non-import VAT and foreign company income tax (CIT) payments.
Moreover, CIT collections from foreign entities experienced a staggering 107 percent surge, skyrocketing from N1.14 trillion in 2022 to N2.38 trillion in 2023. Consequently, the total tax revenue from these streams surged by 93 percent, reaching N3.21 trillion in 2023 from N1.66 trillion in the preceding year.
The rise in tax revenue underscores the significant contribution of foreign firms to Nigeria’s economy. In 2023, CIT collections surged by 73.14 percent, totalling N4.9 trillion, with foreign CIT accounting for 49 percent of this figure.
Conversely, while still notable, the impact of foreign firms on VAT collections was less pronounced. Foreign entities contributed 23 percent to the total VAT collections, amounting to N3.64 trillion for 2023.
This financial landscape emphasises the critical role that international businesses play in bolstering Nigeria’s tax revenue, particularly in the CIT domain. However, it also raises concerns about the country’s vulnerability to exchange rate fluctuations and the need for sustainable economic frameworks amidst short-term gains.