Struggles with Profitability Persist for Nigerian Businesses
Recent analysis of tax data indicates that while Nigerian businesses are achieving notable sales figures, they are encountering significant challenges in converting these sales into profits. This trend raises ongoing concerns regarding the high operating costs faced by the private sector.
Corporate Income Tax Sees Significant Decline
The National Bureau of Statistics (NBS) has reported a discouraging 31.05% drop in corporate income tax (CIT) collections for the first quarter of 2026, falling from N1.98 trillion in the same period last year to N1.37 trillion.
Contrasting Trends in Tax Collections
In contrast, Value Added Tax (VAT) collections recorded a notable increase of 17.06%, rising to N2.42 trillion compared to N2.06 trillion during the same period last year. This discrepancy between CIT and VAT reveals deeper insights into the economic landscape: while VAT is tied to spending and transactions, CIT serves as a reflection of a company’s profitability.
Insights from Experts on the Tax Data
Opeyemi Ajetunmobi, head of advisory and research at a Lagos-based investment and advisory firm, emphasized the importance of analyzing both tax figures in tandem. He pointed out that while VAT collections appear promising, the decline in CIT highlights a troubling narrative.
Rising Costs and Inflation Pressure Businesses
The tax statistics have been released amid persistent inflationary pressures, with Nigeria’s headline inflation rate climbing to 15.69% in April 2026. Food inflation reached 16.06%, and core inflation stood at 15.86%, indicating continued strain on both households and businesses. Notably, rising costs associated with energy, logistics, financing, and imported raw materials remain significant hurdles for many firms.
Foreign Companies Gain a Tax Revenue Advantage
The data reflects an increasing dependency on foreign companies for corporate tax revenue. In the latest quarter, foreign firms contributed N828.82 billion in corporate tax—considerably more than the N538.91 billion generated by domestic companies. Ajetunmobi noted that multinational and export-oriented enterprises display greater resilience compared to their local counterparts, underlining the disproportionate pressures faced by Nigerian-owned businesses.
Mixed Corporate Earnings Amidst Rising Challenges
Not all companies are feeling the pinch of declining profitability. Some, like MTN Nigeria, reported a substantial 165.9% increase in profit after tax to N355.5 billion, driven by strong growth in data revenue. Similarly, Dangote Cement experienced a 35% boost in profit before tax, reaching N421.1 billion as sales rose to N1.19 trillion with easing cost pressures. This contrast illustrates that while many businesses grapple with challenges, larger firms endowed with pricing power and resilience are faring better.
Need for Supportive Policies to Foster Growth
Bolanle Daniel Utele, finance director at the free trade zone, stressed the necessity for policies that encourage business growth rather than merely focusing on tax revenue. He remarked that a supportive environment for companies leads to increased government revenues. As the latest tax data reveals, while many businesses continue to generate revenue, the sharp decline in corporate income tax suggests that profit margins are being squeezed. The ongoing disparity between rising VAT collections and declining CIT will require close monitoring in the upcoming quarters to ascertain its implications for the broader economy.
