ABUJA, Nigeria — Nigeria generated N2.42 trillion in revenue from value-added tax (VAT) in the first quarter (Q1) of 2026, while Company Income Tax (CIT) collections dropped to N1.37 trillion during the same period, according to the latest sectoral distribution report released by the National Bureau of Statistics (NBS).
The VAT figure represents a significant increase compared to previous quarters, reflecting the impact of recent tax policy adjustments and improved collection mechanisms implemented by the Federal Inland Revenue Service (FIRS). The NBS report indicated that the N2.42 trillion collected in Q1 2026 marks a steady upward trajectory in non-oil revenue generation.
The report, which provides a sector-by-sector breakdown of VAT contributions, showed that the manufacturing sector remained the highest contributor to VAT revenue, accounting for approximately 22 percent of the total. Other top contributors included the information and communication sector, mining and quarrying, wholesale and retail trade, and professional services.
However, the drop in Company Income Tax to N1.37 trillion has raised concerns among economic analysts. CIT collections are considered a barometer of corporate profitability and overall business activity. A decline suggests that many companies recorded lower profits or incurred losses during the review period, possibly due to challenging macroeconomic conditions.
The NBS report did not provide specific reasons for the CIT drop, but analysts point to several factors, including persistent foreign exchange volatility, high borrowing costs, rising operational expenses, and subdued consumer spending. Many businesses have struggled to maintain profit margins in an environment characterised by inflation and currency depreciation.
The VAT increase, on the other hand, has been attributed to the federal government’s aggressive push to expand the tax net and improve compliance. The FIRS has deployed technology-driven solutions to identify businesses that were previously outside the tax system, including e-commerce operators, small-scale traders, and professionals in the gig economy.
Economic experts note that the divergence between VAT and CIT performance tells a complex story about the Nigerian economy. Rising VAT collections indicate that consumption remains relatively strong, as the tax is levied on goods and services purchased by consumers. However, falling CIT suggests that the profits of the companies producing those goods and services are under pressure.
The report has sparked discussions among fiscal policy experts about the sustainability of Nigeria’s tax revenue mix. Some have called for a review of the VAT rate, which currently stands at 7.5 percent, arguing that further increases could stifle consumption and hurt low-income households. Others have advocated for tax incentives to boost corporate profitability, which would ultimately increase CIT collections.
The federal government has been working to increase the tax-to-GDP ratio, which remains one of the lowest in the world at approximately 10.8 percent. The government’s target is to raise this ratio to 18 percent within the next three years through a combination of tax administration reforms, digitalisation, and policy adjustments.
The NBS report also provided regional breakdowns of VAT collections, showing that Lagos State remained the highest contributor, followed by Rivers State, the Federal Capital Territory, Kano State, and Oyo State. The five states collectively accounted for over 60 percent of total VAT revenue, highlighting the concentration of economic activity in urban and industrial centres.
In contrast, states in the North-East and North-West regions recorded the lowest VAT contributions, reflecting lower levels of commercial activity and formal sector employment in those areas. This disparity has fueled ongoing debates about the equitable distribution of federally collected revenues among the 36 states.
The FIRS has welcomed the VAT increase as evidence that its reform efforts are yielding results. The service has promised to sustain its modernisation drive, including the expansion of electronic tax filing and payment systems, to further boost collections in subsequent quarters.
However, tax experts caution that the drop in CIT cannot be ignored. They urge the government to address underlying economic challenges, including multiple exchange rates, high energy costs, and infrastructure deficits, which continue to erode corporate profitability and discourage new investment.
As the government prepares its mid-year economic review, all eyes will be on the second-quarter figures to determine whether the VAT increase represents a sustainable trend or a one-off spike. For now, the NBS report presents a mixed picture: consumption is holding up, but the companies driving that consumption are finding it harder to stay profitable.
