Business
Companies Pay Less Tax in Q1 2024 Amid Worsening Economy
A recent review of the Company Income Tax (CIT) report for the first quarter of 2024 reveals a significant decline in income tax payments by companies in various sectors, highlighting the economic challenges faced by businesses in Nigeria.
Decline in CIT Payments
The CIT report indicates that companies in 14 out of 21 sectors experienced a decrease in tax payments, leading to a 12.87% overall decline in CIT collection for the quarter. CIT is levied on companies with a turnover of N25 million and above, at rates of 20% for turnovers between N25 million and N100 million, and 30% for turnovers exceeding N100 million.
Key sectors that saw notable declines include:
- Manufacturing: The largest drop, with CIT payments plummeting by 70.24%, from N145.06 billion in Q4 2023 to N43.17 billion in Q1 2024.
- Electricity, Gas, and Steam Supply: A 69.14% decline, from N16.83 billion to N5.19 billion.
- Agriculture: A 59.31% decrease in CIT payments.
- Arts and Entertainment: A 56.19% decline.
Other sectors with reduced CIT payments include transport services (-45.49%), wholesale and retail trade (-39.66%), real estate services (-40.64%), and human health and social work (-16.20%).
Economic Challenges and Declining Profits
The Director of the Centre for the Promotion of Public Enterprise (CPPE), Dr. Muda Yusuf, attributed the decline in tax payments to the macroeconomic challenges affecting the nation. These include high inflation, exchange rate volatility, and elevated input costs, which have severely impacted business profits.
Yusuf explained, “The decline in tax payment by companies means the economic situation is impacting the fortunes of businesses. CIT is charged on your profit, so if you are not making much profit, your tax payment would be reduced.”
Business Sector Struggles
In the first quarter of 2024, the exchange rate fell to a record N1,500 to the USD, while inflation reached 33.2% in March, leading to declining revenues and, in some cases, business closures. The Stanbic Purchasing Managers’ Index (PMI) for February dropped to 51.1 from 54.5 in January, reflecting high input costs driven by exchange rate weakness. Business owners reported that input costs had risen to the highest level in a decade.
Profit Declines Among Listed Companies
A review of the financial performance of listed companies revealed significant losses, contributing to the decline in tax payments:
- Lafarge Cement: Profit-After-Tax (PAT) declined by 65% in Q1 2024.
- Beta Glass Plc: PAT dropped from N1.89 billion to N1.43 billion.
- Cadbury: Posted a loss of N7.3 billion in Q1 2024, down from a profit of N3.5 billion the previous year.
- Dangote Sugar: Reported a loss after tax of N68.99 billion, compared to a profit of N12.80 billion in Q1 2023.
- International Breweries: Continued its loss streak, with losses increasing from N2.30 billion in Q1 2023 to N60.39 billion in Q1 2024.
- MTN Nigeria Plc: Saw a pre-tax loss of N575 billion in Q1 2024, from N162 billion the previous year.
Impact on Government Revenues
The decline in corporate profits has resulted in reduced tax payments, significantly impacting government revenues. The Federal Inland Revenue Service (FIRS) failed to meet its revenue target by N860 billion in Q1 2024, generating N3.94 trillion out of a targeted N4.8 trillion. This shortfall further exacerbates the challenge of achieving the annual revenue target of N19 trillion.
The economic environment remains challenging, with businesses struggling to maintain profitability amid rising costs and currency instability, ultimately leading to lower tax contributions and a strain on government finances.
Business
SEC Chairman Gary Gensler to Step Down Ahead of Trump Inauguration
Gary Gensler, the chairman of the U.S. Securities and Exchange Commission (SEC), has announced his resignation effective January 20, 2025, coinciding with the inauguration of President-elect Donald Trump.
The SEC confirmed the news on Wednesday, and Gensler later addressed his departure on X, formerly Twitter. “I thank President Biden for entrusting me with this incredible responsibility,” Gensler wrote. “The SEC has met its mission and enforced the law without fear or favor.”
Gensler, who has served as SEC chairman since 2021, was appointed by President Joe Biden to oversee the regulatory agency during a period of intense scrutiny of financial markets and the cryptocurrency sector. His term was initially set to run until 2026, but it is customary for leaders of federal agencies to step down when a new administration takes office.
President-elect Trump had previously announced plans to replace Gensler “on day one” of his administration. This decision follows contentious legal actions taken by Gensler’s SEC against several cryptocurrency firms, which Trump and others have criticized as overly aggressive.
Gensler’s tenure has been marked by a crackdown on crypto markets and efforts to strengthen oversight of digital assets, moves that sparked both praise and criticism. Trump, a known skeptic of cryptocurrency regulations, has expressed starkly contrasting views on the industry, leading to tension between the incoming administration and the outgoing chairman.
During his tenure, Gensler focused on enhancing transparency and protecting investors across traditional and emerging financial markets. However, his approach, particularly toward the cryptocurrency sector, has drawn mixed reactions. Proponents argue that his actions brought much-needed regulation to the volatile digital asset space, while critics claim they stifled innovation.
The SEC has not yet announced an interim chair or a successor.
Business
Logan Paul Faces Scrutiny Over Cryptocurrency Promotions and Investments
Logan Paul, a prominent social media influencer with over 23 million YouTube subscribers, is under fire for his involvement in cryptocurrency projects. Accusations have surfaced that Paul may have profited by allegedly misleading fans into investments that caused token prices to spike.
Paul’s influence in the crypto space has been growing over the past three years, as his videos increasingly reference blockchain technologies and investment opportunities. However, some critics argue his endorsements lack transparency, fueling speculation that he may have sold tokens at inflated prices after his promotions.
Adding to his challenges, Paul is embroiled in a multi-million-dollar lawsuit over CryptoZoo, a failed crypto project he backed. The venture was marketed as a play-to-earn game, but investors claim they lost significant sums when the project collapsed.
Paul has denied any wrongdoing in connection to both CryptoZoo and his other cryptocurrency activities. Despite the controversy, he remains a major figure in the influencer world, leveraging his platform to shape conversations and trends across various industries.
Business
Walmart Raises Full-Year Outlook as Holiday Shopping Boosts Sales
Walmart has once again raised its annual sales forecast, citing stronger-than-expected consumer spending on non-grocery items, increased home delivery orders, and early holiday shopping. The retail giant now anticipates net sales growth between 4.8% and 5.1% for the fiscal year, up from its previous projection of 3.75% to 4.75%.
The updated outlook was announced alongside third-quarter earnings that surpassed Wall Street expectations. Chief Financial Officer John David Rainey noted that general merchandise sales increased year-over-year for the second consecutive quarter, reversing a decline that spanned 11 quarters. However, he highlighted that customers remain price-sensitive, waiting for deals, particularly as food prices remain elevated.
“We’re expecting this holiday period to be very consistent with that,” Rainey said, emphasizing shoppers’ focus on price and value.
Walmart’s strong performance propelled its shares up by about 3% in early trading, reaching a 52-week high and setting a new all-time intraday record since the company began trading on the New York Stock Exchange in 1972.
For the quarter ending October 31, Walmart reported a sharp increase in net income, rising to $4.58 billion, or 57 cents per share, compared with $453 million, or 6 cents per share, a year earlier. Revenue climbed to $164.05 billion, up from $160.80 billion in the same period last year.
Comparable sales, a key industry metric, grew 5.3% for Walmart U.S. and 7% at Sam’s Club (excluding fuel). Walmart also reported higher customer engagement, with U.S. transactions rising 3.1% and average ticket size increasing 2.1% year-over-year.
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