Cashless transactions hit N117.33tr as economy grew by 3.11% in Q1 2022
By EDU ABADE, Business Editor
- Payment of company income tax rise to N532.48b
A recent report of the Nigeria Inter-Bank Settlement System (NIBSS) has indicated that between January and April 2022, about N117.33 trillion payments were processed through various electronic channels.
This is N35.79 trillion higher than the N81.54 trillion processed in the corresponding period of 2021. Nigeria recorded N27.22 trillion in electronic payments in January 2022, N27.76 trillion in February, N32.52 trillion in March and N29.84 trillion in April 2022, amounting to N117.33 trillion.
The NIBSS monitors cashless transactions through the Nigeria Instant Payment System (NIPS) and Point of Sales (POS) terminals in Nigeria. The COVID-19 pandemic might be partly responsible for the rise in the value of cashless transactions. At the peak of the pandemic, the lockdown and movement restrictions compelled Nigerians, especially the youths, to purchase goods via e-commerce channels and pay electronically.
In addition, increase in the value of electronic transactions indicates progress towards attaining the Central Bank of Nigeria’s (CBN) policy goal of a cashless economy. Transaction charges per electronic transaction make some people prefer payment through cash.
Hence, reducing transaction charges will likely increase electronic payments and, in turn, reduce exposure to risks such as robbery associated with carrying bulk cash and lower the frequency of printing new currency notes to replace damaged ones.
Also, data released by the National Bureau of Statistics (NBS) showed that Nigeria’s economy grew in real terms by 3.11 per cent in the first quarter (Q1) of 2022. The growth rate is 2.6 per cent points higher than the 0.51 per cent growth rate recorded in Q1 2021, but 0.88 per cent points lower than the 3.98 per cent recorded in Q4 2021.
Although there was marginal decrease in real output growth, the quarter growth made it the sixth quarter of uninterrupted positive growth since the country exited the COVID-19 induced recession in Q4 of 2020.
A report by the Centre for the Study of the Economies of Africa (CSEA), which validated the NBS’ data, revealed that the non-oil sector grew by 6.08 per cent and contributed about 93.37 per cent of total output in the period under review. However, the oil sector contracted by 26.04 per cent, and its share dipped to 6.63 per cent in Q1 2022 from 9.25 per cent in 2021.
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Persistent vandalism and illegal refineries are partly responsible for the declining contribution of the oil sector, while the electricity sector contracted by 11.2 per cent, partly due to the frequent collapse of the transmission network in the period under review.
For the Nigerian economy to have high and sustainable growth, the non-oil sector growth needs to be sustained to compensate for the contraction in the oil sector. Also, the country’s electricity generation and distribution need to be improved. The unreliable electricity situation partly contributes to the high cost of doing business and indirectly hinders growth.
Meanwhile, Company Income Tax (CIT) revenue in Nigeria increased in Q1 2022 to N532.48 billion, a growth of 53.09 per cent on quarter-on-quarter basis from N347.81 billion in Q4 2021 and 35.61 per cent on year-on-year basis from N392.65 billion in Q1 2021. By disaggregating CIT revenue into foreign CIT and local payments in Q1 2022, domestic payments amounted to N209.13 billion.
It constitutes about 39.27 per cent of total CIT, which is qualitatively similar to 38.79 per cent recorded in Q1 2021 but lower than 88.49 per cent recorded in Q2 2021, 57.13 per cent in Q3 2021, and 74.42 per cent in Q4 2021.
The distribution of CIT between local and foreign CIT payments reflects the quarter that local organisations are more likely to remit their CIT payments relative to foreign organisations.
Furthermore, the data shows that Manufacturing, Information and Communication, and financial and insurance sectors were the top three contributors to the local CIT payments.
They contributed about 47.5 per cent of local CIT payments in the period under review. The increase in CIT might be partly due to the implementation of TaxPro Max, a digital tool developed by the Federal Inland Revenue Service (FIRS) to make tax filings and payments more convenient.
The digitisation of tax payments reduces revenue leakages and eliminates challenges associated with cash payments. The current level of digital tools in tax payment is below the desired level; hence, the government needs to intensify efforts to increase awareness about the TaxPro Max, which is the FIRS digital tax payment platform.
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