This week, we shift our focus to the Company Income Tax (CIT), Value Added Tax (VAT) and Trade Statistics reports for Q2:2024 released by the National Bureau of Statistics (NBS). The CIT and VAT data provides insights into the performance of critical non-oil revenue components when compared to budgeted benchmarks, while the Trade Statistics report details Nigeria’s net trade position.
Highlighting key data from the CIT report, gross collections realised by the FG rose 150.8% q/q to a record ₦2.5tn in Q2:2024, implying a y/y growth of 59.5%. Similarly, gross VAT improved by 9.1% q/q (up 99.8% y/y) to ₦1.6tn. Consequently, the gross CIT and VAT cumulated at ₦3.5tn and ₦3.0tn respectively in H1:2024, up 71.2% and 100.7% from the corresponding base period.
The improved CIT collection stemmed from substantial foreign component gain (45.3% of total) which was up 114.0% y/y, contributing 38.5% points to the overall y/y CIT growth of 59.5%. This performance was underpinned by an improvement in global economic dynamics such as business margins recovery amid decelerating inflation. On the domestic front, collected taxes grew 31.7% y/y following a 3.5x q/q jump in Q2 (Q1-2024: -27.6%). The key sectors in terms of contributions were Financial & Insurance, Mining & Quarrying, Wholesale & Retail Trade, Public Administration & Defence, and Professional, Scientific & Technical Activities, with respective y/y growths of 53.0%, 204.8%, 46.4%, 81.7% and 243.9%. In our opinion, the strong CIT collection can be linked to positive commercial activities within the sectors alongside aggressive tax mobilisation drive by the FG, aimed at supporting income.
Meanwhile, Q2 VAT revenue was upheld by non-import local VAT (+54.8% y/y), non-import foreign VAT (+177.5%) and Nigerian Customs Service (NCS) – Import VAT (+194.4%). Top sectors that drove the headline non-import local VAT realized were Mining & Quarrying (+155.0% y/y), Public Administration & Defence (+122.4%), Financial & Insurance (+44.2%), Information & Communication (+29.8%) and Manufacturing (+21.2%). Similar to CIT, the mix of better economic outcomes on the domestic and international fronts complemented efforts by FG to improve non-oil income.
Given the provision of the Finance Act 2020 that pegged the cost of collections at not more than 50% of the collected amount, we estimate minimum CIT (gross CIT less collection cost) at ₦1.7tn for H1:2024. This number translates to ₦3.5tn annualised, which runs ahead of the budgeted target of ₦1.5tn. Meanwhile, adjusting VAT collected for the maximum cost of 50.0% and FG’s 15.0% share of net suggests that FG potentially raked in ₦224.4bn for H1:2024 against pro-rated target of ₦256.4bn (a variance of -12.5%). Combined, these nonoil taxes could exceed their budget by 96.6% in 2024. In fact, CIT over-performance could push collections to nearly match total non-oil taxes of ₦3.5tn, which should leave some room to absorb negative shocks to oil revenue projections.
That said, we maintain our recommendation for the FG to support other sectors of the economy such as trade, transportations & storage, construction and real estate sectors. These efforts should result in a boost to non-oil revenue generation.
In other developments, Nigeria’s trade surplus rose by 33.6% q/q and 52.2x y/y to ₦6.9tn in Q2:2024. The uptrend reflects sharper export earnings of ₦19.4tn (up 1.3% q/q and 201.8% y/y) relative to imports bills of ₦12.5tn (-10.7% q/q and 97.9% y/y). Based on revised NBS numbers, trade position for H1:2024 sums to a surplus of ₦12.1tn (H1-2023: ₦154.1bn). We note that although crude oil (down 6.0% q/q) accounted for 75.0% of total exports, exports growth in Q2:2024 was driven by a 32.0% q/q boost in non-crude oil sector, particularly the manufacturing exports (up 78.9% q/q to ₦480.8bn). Meanwhile, the import leg was mainly dragged by sharp quarterly decline in oil products (down 23.3% to ₦5.8tn).
The top three import sources in Q2:2024 were China (24.3%), Belgium (14.4%) and India (8.5%) while main export destinations were Spain (10.3%), United States (9.6%), and France (9.4%). Looking ahead, we anticipate trade surplus to persist as FX challenges and supply from Dangote oil refinery should put a lid on import bill relative to exports.
Afrinvest
