Nigeria’s Foreign Tax Earnings Springs Up Over Weak Naira
Nigeria has witnessed a significant surge in tax earnings from foreign firms, with figures nearly doubling in the span of one year.
This significant fiscal boost is likely due to the weakening of the naira, which has increased the local currency’s value of foreign transactions for non-import (foreign) Value Added Tax (VAT) and Foreign Company Income Tax (CIT) payments.
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The latest data from the National Bureau of Statistics (NBS) for 2023 indicates that Nigeria’s revenue from foreign-related Value Added Tax (VAT) rose by 61%, with figures reaching N824.6 billion, a significant increase from N510.8 billion in 2022.
More noteworthy is the surge in Corporate Income Tax (CIT) from foreign entities, which has seen a 107% increase, climbing from N1.14 trillion in 2022 to N2.38 trillion in 2023.
Cumulatively, the total tax revenue from these streams rose by 93%, from N1.66 trillion in 2022 to N3.21 trillion in 2023.
While the increase in tax revenue is a welcome development for the country’s finances, it also highlights the Nigerian economy’s exposure to exchange rate risks.
The current boost in tax earnings is significantly propelled by the naira’s weakness, which, while beneficial in the short term, may mask underlying vulnerabilities in the economic framework.
