Manufacturers’ Company Income Tax Payments Crash 68% as Economic Pressures Mount

Company Income Tax (CIT) payments by Nigeria’s manufacturing sector declined sharply by 68.25 per cent year-on-year in the first quarter of 2026, raising concerns about the sector’s profitability and ability to cope with persistent economic challenges despite recent tax reforms.

According to an analysis of the latest Company Income Tax report released by the National Bureau of Statistics (NBS), manufacturers remitted ?74.48 billion in CIT during Q1 2026, compared to ?234.59 billion recorded in the corresponding period of 2025. This represents a decline of ?160.11 billion within one year.

The sector also recorded a significant quarter-on-quarter drop, with tax payments falling by 47.49 per cent from ?141.84 billion in Q4 2025 to ?74.48 billion in the first quarter of 2026.

The NBS, citing data obtained from the Nigeria Revenue Service, disclosed that total Company Income Tax collections stood at ?1.37 trillion in Q1 2026, reflecting an 8.08 per cent decline from ?1.49 trillion recorded in the preceding quarter.

The report further showed that overall CIT collections declined by 31.05 per cent year-on-year, indicating a broader reduction in corporate tax receipts across the economy. However, the manufacturing sector’s decline was considerably steeper than the national average.

Despite the downturn, manufacturing remained one of the three largest contributors to domestic company tax revenue during the quarter. The sector accounted for 13.82 per cent of domestic CIT collections, ranking behind the financial and insurance sector, which contributed 24.73 per cent, and the mining and quarrying sector, which accounted for 16.06 per cent.

In monetary terms, financial and insurance activities generated ?133.27 billion in tax revenue, while mining and quarrying contributed ?86.55 billion. Manufacturing followed with ?74.48 billion.

However, when measured against the total CIT collection of ?1.37 trillion, which includes foreign company tax payments, manufacturing contributed only 5.45 per cent of overall revenue.

The report revealed that domestic CIT amounted to ?538.91 billion, while foreign company tax payments contributed ?828.82 billion, accounting for approximately 60.6 per cent of total collections during the quarter.

Analysts suggest that the decline in manufacturing tax payments may be linked to weaker profitability resulting from high production costs, expensive energy, exchange rate volatility, elevated borrowing costs, logistics challenges, and reduced consumer purchasing power.

The first quarter of 2026 also marked the implementation of Nigeria’s revised tax framework, which came into effect in January. This has prompted discussions on whether compliance adjustments, payment timing, or shifts in corporate earnings may have influenced tax remittances during the period.

The manufacturing sector was not alone in experiencing a downturn. Agriculture, forestry, and fishing recorded the largest quarter-on-quarter decline in tax payments at 73.52 per cent, followed by the construction sector at 63.15 per cent.

Conversely, water supply, sewerage, waste management, and remediation activities posted the strongest growth, with tax payments increasing by 485.71 per cent, while activities of households as employers rose by 197.04 per cent.

The figures indicate a growing reliance on financial services, mining, and foreign tax contributions to support overall company tax revenue, while traditionally productive sectors such as manufacturing are contributing less than they did a year earlier.

Company Income Tax is levied on the profits of businesses operating in Nigeria after allowable deductions and reliefs have been applied under the Companies Income Tax Act.

Under the new tax reforms signed into law by Bola Tinubu, the CIT rate was reduced from 30 per cent to 25 per cent. The reforms also introduced a zero per cent CIT rate for companies with annual turnovers of ?100 million or less.

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, had previously stated that the reforms were designed to ease the tax burden on small and medium-sized enterprises while promoting business growth and investment across the economy.