Nigeria's challenging business environment is taking a visible toll on corporate earnings, with government revenue from Company Income Tax (CIT) recording a sharp decline in the first quarter of 2026 despite continued growth in Value Added Tax (VAT) collections.
According to the latest Company Income Tax report released by the National Bureau of Statistics (NBS), CIT revenue fell significantly to N1.37 trillion in Q1 2026, representing a 31.05 per cent decline compared to the N1.98 trillion generated during the corresponding period in 2025.
The figures also revealed a quarter-on-quarter drop of 8.08 per cent from the N1.49 trillion recorded in the fourth quarter of 2025, highlighting the continued pressure facing businesses across several sectors of the economy.
The decline comes amid persistent economic challenges, including high operating costs, inflationary pressures, foreign exchange volatility, rising energy expenses, and weakening consumer purchasing power. These factors have forced many businesses to scale back operations, reduce investments, relocate to more favorable markets, or shut down entirely.
While corporate tax revenue declined, VAT collections painted a different picture. The NBS report showed that VAT revenue rose to N2.42 trillion in Q1 2026, marking a 17.06 per cent increase from the N2.06 trillion generated during the same period last year.
On a quarterly basis, VAT revenue also increased by 9.98 per cent from the N2.2 trillion recorded in Q4 2025, suggesting that consumer spending and transaction volumes remained relatively resilient despite broader economic challenges.
A breakdown of the CIT figures revealed that foreign companies accounted for the larger share of tax payments during the quarter. Foreign CIT contributions stood at N828.82 billion, while domestic companies contributed N538.91 billion.
The data underscores the growing reliance on foreign corporate tax payments at a time when many indigenous businesses continue to grapple with difficult operating conditions.
Sectoral analysis of the tax revenue showed that the financial and insurance industry remained the largest contributor, accounting for 24.73 per cent of total CIT collections. The mining and quarrying sector followed with 16.06 per cent, while manufacturing contributed 13.82 per cent.
These sectors continue to play a critical role in government tax receipts despite broader economic headwinds affecting business profitability.
The latest decline extends a trend of fluctuating corporate tax performance observed over recent quarters.
In the fourth quarter of 2025, CIT revenue dropped sharply to N1.49 trillion, representing a 49.81 per cent decrease from the N2.96 trillion recorded in the third quarter of the same year.
Although the third quarter of 2025 saw CIT collections rise by 6.55 per cent to N2.96 trillion from N2.78 trillion in Q2 2025, much of that growth was driven by foreign corporate tax payments rather than stronger domestic business performance.
During that quarter, foreign companies contributed N1.75 trillion in taxes, significantly outpacing the N1.21 trillion generated from domestic firms.
Economic analysts say the latest figures reflect the realities facing many Nigerian businesses, which continue to contend with rising production costs, reduced access to affordable financing, infrastructure challenges, and declining consumer demand.
The contrast between declining corporate tax revenue and rising VAT collections also highlights an important trend in the economy. While businesses are experiencing pressure on profitability, consumer transactions and indirect tax collections remain relatively strong, providing some support for government revenues.
As policymakers seek to boost economic growth and attract investment, the latest tax data is expected to renew discussions on measures needed to improve the business climate, strengthen local enterprise competitiveness, and support sustainable revenue generation for the government.