Goddy Egene writes that Dangote Cement continues to influence other listed companies to increase federal government revenues through payment of corporate tax
There is no doubt that Nigerians and the companies operating in the country are very resilient. Although there are many investment opportunities, few companies are encouraged to establish their businesses due to poor infrastructure and high cost of doing business, among other factors.
It is believed that if the necessary infrastructure is put in place, more direct investment would be attracted to the country. With many companies operating profitably, jobs would be created, dividends paid to shareholders while more money would go into government coffers in the form of corporate tax.
However, despite the difficult operating environment, listed companies have struggled to beat every chance of remaining in business. Company results released for the fiscal year ended Dec.31, 2020 showed that amid head winds in the economy, some of the companies contributed significantly to government revenue in the form of corporate taxes.
This became evident last week when Dangote Cement Plc announced its results, showing it paid around 97.2 billion naira in corporate tax. Further analysis showed that the pan-African cement manufacturing company paid 236.6 billion naira in taxes over the past three years.
The payment, which covers 2018, 2019 and 2020, amounts to an average annual tax of 79 billion naira. During the three years, Dangote Cement Plc recorded an after-tax profit of 867 billion naira, resulting in an average profit of 287 billion naira per year.
Dangote Cement Plc is the clear leader in terms of tax payment despite not being the best in terms of profitability. BUA Cement Plc, which became one of the leading cement manufacturing companies last year following the merger of Cement Company of Northern Nigeria Plc and Obu Cement Plc, posted a profit of 131.1 billion naira in 2019 and 2020. The company posted an average profit of 65 naira. 0.5 billion over the past two years and paid a combined tax of 14.1 billion naira or an average tax of 7.1 billion naira.
Likewise, Lafarge Africa Plc, which recouped losses in 2019, recorded a combined profit of N 46.3 billion in 2019 and 2020 and paid a tax of N 6.7 billion in 2020. NestlÃ© Nigeria Plc a paid a tax of 21.426 billion naira in 2019, which was lower than 25.4 billion naira in 2020.
As for the banking sector, it has also been a big tax contributor for the government, according to figures from some of the banks that announced their audited 2020 results. However, compared to manufacturing sectors, it lags behind.
About 11 banks paid a total of N123.3 billion in taxes, although they would be more profitable than the 10 manufacturing companies that paid a total of N157.17 billion in taxes in 2020.
But Zenith Bank Plc paid a total of 81.8 billion Naira in tax from 2018 to 2020, which translates into an average tax of 27.3 billion Naira per year. The bank finished with a combined profit of 631 billion naira and an average of 210 billion naira each year for the past three years.
In a similar vein, Guaranty Trust Bank Plc paid a tax of 102.3 billion naira from 2018 to 2020 or an average of 34.1 billion naira and posted a profit of 582.9 billion naira in three years, which represents 194.3 billion naira on an annual average.
Pan-African financial institution United Bank for Africa Plc has contributed a total of 68.5 billion naira to government coffers for corporate tax over the past three years, which means it has contributed an average of 23 billion naira each year. The bank ended up making a profit of 281.5 billion naira in three years and an average of 93 billion naira per year, from which it recommended a dividend to shareholders.
Stanbic IBTC Holdings Plc, which also released its results last week, paid a total of N41.1 billion in tax in three years and made a profit of N234.6 billion in three years or 77, 5 billion naira on average annually.
Analysts believe that if the government can improve the operating environment and make it more conducive to business prosperity, it will have a positive impact on its revenues as more profits will be made and more taxes paid.
For Dangote Cement Plc to pay 97.2 billion naira in corporate tax, the company has performed impressively, increasing both revenue and bottom line.
Dangote Cement sold 15.9 Mt in 2020, including cement and clinker sales, implying a 12.9% growth above 14.1 Mt in 2019. Considering only national sales, Nigerian operations sold 15.6 Mt, up 14.3% year on year and resulting in an increase in market share.
Revenues from Nigerian operations increased by 720 billion naira, driven by demand in the domestic market. The Nigerian company posted strong earnings before interest, taxes, depreciation and amortization (EBITDA) of 421.4 billion naira, showing a margin of 59 percent.
Commenting, Michel Puchercos, CEO of Dangote Cement Plc, said: â2020 has been a good year for Dangote Cement at all levels. Several firsts made 2020 a productive year, such as our first shipment of clinker, our first bond issue and our successful buyback program. We increased our capacity by 3.0 Mt in Nigeria, inaugurated our two export terminals and inaugurated our gas plant in Tanzania. All of this was achieved as we focused on protecting our employees, customers and communities from the impact of the pandemic.
âDangote Cement recorded strong revenue growth supported by strong demand for cement. Profitability was bolstered by our disciplined cost control measures during what we thought was a very inflationary and volatile year. These measures resulted in an after-tax profit of 276.1 billion naira.
âGoing forward, we have strengthened our alternative fuel initiative which focuses on harnessing the circular economy business model and reducing the exposure of our cost base to foreign currency fluctuations. We continue to embed Dangote Cement’s Seven Pillars of Sustainability into every aspect of our operations and culture.
âWe remain committed to ensuring the safety of our staff and communities by fully complying with health and safety measures in all of our areas of operation. We focus on adapting to the rapidly changing markets in which we operate.
The CEO said the company remains committed to ensuring the safety of our staff and communities by fully complying with health and safety measures in all of our operating territories. We focus on adapting to the rapidly changing markets in which we operate.
However, the tax paid by Dangote Cement did not surprise some market players given the tax payment commitment.
The cement plant had stated in its 2019 sustainability report that as a responsible corporate citizen, it ensures timely compliance with tax regulations in all countries where we operate.
âThis commitment allows us to support the socio-economic development of the African continent. By paying our taxes responsibly and transparently, we support the government’s plans for infrastructure development in our various markets. We also contribute to the achievement of SDG 11 (Sustainable Cities and Communities). We report annually on our tax payments to governments. This way we are transparent about how we manage our financial obligations, âhe said.
In addition to increasing government revenues in the countries where it operates, Dangote Cement has also been a major employer of labor on the continent.
âAs the largest cement manufacturer in Nigeria and one of the largest employers in sub-Saharan Africa, we understand the challenges posed by the high unemployment rate on the continent, especially among the youth population. Throughout our operations, we have created jobs for thousands of Nigerians and Africans in nine other countries, âhe said.
According to the company, in addition to direct job creation, its activities support thousands of jobs in its supply chain, through indirect and induced impacts. âAccording to our 2019 socio-economic impact assessment study specifically on our operations in Nigeria, Ethiopia, Senegal and South Africa, we maintained 54,005 jobs (direct, indirect, induced) on these four markets during the year under review, âhe said.