3
Nigeria’s Companies Income Tax (CIT) revenue surged to record highs in the second quarter of 2025, signalling strengthening corporate performance and improved tax administration.
Fresh data from the National Bureau of Statistics (NBS) shows that CIT collections rose to N2.8 trillion in Q2, representing a 13 percent year-on-year increase and an impressive 40 percent quarter-on-quarter jump compared with the first quarter.
The latest figures cap off a strong half-year performance, with total CIT receipts reaching N4.8 trillion in the first six months of 2025—up 38 percent year-on-year from N3.5 trillion recorded in the corresponding period of 2024.
Analysts say this broad rise reflects improved business conditions, greater tax compliance, and the Federal Government’s continued digitalisation of tax collection systems.
Domestic firms dominate revenue growth
The standout factor in the Q2 numbers is the extraordinary rise in tax remittances from domestic companies.
Local firms contributed N2.3 trillion, more than tripling the N646.5 billion collected in the previous quarter.
This sharp rise means domestic companies accounted for 83 percent of all CIT revenue in Q2.
Tax experts attribute the surge to stronger profitability among Nigerian corporates, particularly those benefiting from easing inflation, better access to foreign exchange, lower energy prices, and a more predictable policy environment.
“This is one of the most significant shifts we’ve seen in years,” said an Abuja-based tax analyst. “Domestic firms are no longer just filling the gap—they are now the primary engine of federal tax growth.”
Foreign CIT remittances drop to two-year low
While local companies excelled, foreign firms posted their weakest result in two years. Foreign CIT payments fell to N469.4 billion in Q2, down sharply from N1.4 trillion in Q1. This represents the lowest quarterly contribution since Q1 2023.
Analysts say the decline may reflect reduced profitability among multinational firms, restructuring of regional operations, and stricter enforcement that has eliminated some previously misclassified tax flows.
Financial and insurance sector records unprecedented growth
Across sectors, the financial and insurance industry posted the strongest performance by far.
It recorded a staggering 772 percent quarter-on-quarter increase, contributing ₦1 trillion—equivalent to 37 percent of total CIT revenue.
The sector’s dominant showing comes as banks return to normalised earnings patterns. In 2024, many banks recorded outsized profits due to foreign exchange revaluation gains following the naira’s depreciation. The more stable currency environment of 2025, coupled with tighter regulatory oversight, has erased those earlier FX windfalls.
As a result, banks are now generating revenue from core operations—particularly lending, fees, and investment income—leading to stronger and more sustainable tax contributions.
“This year, bank earnings are based on fundamentals, not revaluation gains,” a Lagos-based banking analyst explained. “That’s why their tax performance looks more reflective of true sector strength.”
Manufacturing and mining strengthen their role
The manufacturing sector emerged as the second-largest contributor to domestic CIT receipts, with collections rising to N360.2 billion from N107.9 billion in the previous quarter. With a 13 percent share of total CIT revenue, the sector’s strong performance suggests higher production output, improved capacity utilisation, and lower operating costs due to eased inflation and more stable forex supply.
Mining and quarrying followed as the third-largest contributor, generating N212.3 billion—a 49 percent q/q increase and 8 percent of total collections.
Increased activity in the extractive industries, supported by improving commodity prices and ongoing regulatory reforms, boosted the sector’s tax performance.
Digital tax reforms improve compliance
Government reforms aimed at modernising tax administration appear to be paying off.
The adoption of digital filing platforms, automated tax assessment tools, and expanded data-sharing frameworks have significantly improved compliance.
The Federal Inland Revenue Service (FIRS) has also intensified enforcement, particularly among medium and large taxpayers.
“These systems have closed loopholes and improved real-time tracking of tax obligations,” an NBS official said.
“The structural improvements are beginning to show clearly in the numbers.”
Corporate performance boosted by macroeconomic stability
Corporate profitability has benefited from improving macroeconomic conditions. After the turbulence of the last two years, businesses are now operating in a more stable environment marked by: Reduced inflationary pressures, lowering input costs, improved FX stability, enabling better financial planning, softer energy prices, easing production expenses and a less aggressive monetary policy stance, improving access to credit
These conditions have lifted earnings across several industries, directly supporting higher CIT remittances.
Outlook: Positive momentum, but risks remain
With CIT already at N4.8 trillion halfway through the year, Nigeria is on track to exceed its 2024 tax performance—provided economic stability continues.
The challenge will be reversing the slump in foreign firm contributions, which may require deeper reforms to boost investor confidence.
Still, analysts agree that the surge in domestic CIT collections marks a positive shift in Nigeria’s fiscal landscape.
“For the first time in years, homegrown companies are driving the bulk of government tax revenue,” an economist noted.
“This trend—if maintained—could significantly improve fiscal resilience and reduce Nigeria’s dependence on oil.”
As Nigeria prioritises revenue diversification, the Q2 CIT performance offers strong evidence that reforms, stability, and corporate recovery are beginning to align in the right direction.
Read the full article here
