Nigerian businesses are raking in sales but struggling to turn them into actual profits, latest tax data shows. The situation highlights mounting pressure from high operating costs squeezing the private sector.
Company Income Tax collections plummeted 31.05 percent to N1.37 trillion in the first quarter of 2026. That's down sharply from N1.98 trillion in the same period last year.
Value Added Tax told a different story entirely. VAT collections jumped 17.06 percent to N2.42 trillion, up from N2.06 trillion a year earlier.
The contrast matters because VAT tracks spending and business transactions. CIT, however, reflects what companies actually earn as profit.
Opeyemi Ajetunmobi runs advisory and research at a Lagos investment firm. "Two Q1 2026 NBS numbers nobody reads together are VAT and company income tax," he posted on LinkedIn.
According to him, VAT collections climbed 17 percent year-on-year while CIT fell 31 percent. "VAT looks like progress," Ajetunmobi noted, "but CIT tells a different story."
He argued the numbers reveal businesses facing severe margin pressures. Rising interest rates, currency volatility, and climbing operating costs are the culprits.
Inflation remains a persistent headache across the economy. Nigeria's headline inflation hit 15.69 percent in April 2026, with food inflation at 16.06 percent.
Energy costs, logistics fees, and imported input prices continue crushing businesses. This persists despite some signs of macroeconomic improvement.
Bolanle Daniel-Utere, finance director at a free trade zone, sees the problem clearly. "Businesses face mounting pressures across the entire economy," she told reporters.
She noted weakened profitability stems from rising operating costs and increased borrowing expenses. Inflationary pressure and generally difficult conditions make matters worse.
Many firms do report growing turnover, Daniel-Utere acknowledged. But higher costs are eating into profit margins and reducing taxable income.
Foreign companies are dominating corporate tax collections now. They contributed N828.82 billion in CIT during the quarter.
Domestic firms generated just N538.91 billion. Ajetunmobi said multinational and export-oriented businesses are proving far more resilient than local companies.
"Foreign companies are carrying domestic companies," he said bluntly. "Multinationals contribute over 60 percent of corporate tax revenue while Nigerian-owned businesses struggle disproportionately."
Government efforts to tax foreign digital businesses are clearly working. These initiatives are reshaping Nigeria's entire tax base.
Not every company is experiencing weaker profits, however. Some firms continue posting stronger earnings despite the challenging environment.
