Nigeria witnesses surge in tax earnings from foreign firms, doubles in one year

Nigeria has experienced a notable surge in tax earnings from foreign firms, with figures nearly doubling within a year, signaling a significant fiscal boon for the country.

This remarkable increase is attributed to the depreciation of the naira, which has amplified the value of foreign transactions for non-import Value Added Tax (VAT) and Foreign Company Income Tax (CIT) payments.

According to the latest data from the National Bureau of Statistics (NBS) for the year 2023, Nigeria’s revenue from foreign-related Value Added Tax (VAT) surged by 61 percent, soaring to N824.6 billion from N510.8 billion recorded in 2022.

Moreover, Corporate Income Tax (CIT) from foreign entities experienced an even more substantial surge, escalating by 107 percent from N1.14 trillion in 2022 to N2.38 trillion in 2023.

The cumulative effect of these increases resulted in a total tax revenue surge of 93 percent, soaring from N1.66 trillion in 2022 to N3.21 trillion in 2023.

While the surge in tax revenue bodes well for the country’s financial health, it also underscores Nigeria’s vulnerability to exchange rate fluctuations. The current upsurge in tax earnings is largely driven by the naira’s weakness, which, although advantageous in the short term, may obscure underlying economic vulnerabilities.

This development highlights the imperative for Nigeria to address its exposure to exchange rate risks and implement robust economic policies to ensure long-term stability and resilience in the face of fluctuating global dynamics.