In the first three months of 2024, Nigerians paid N1.43 trillion in Value Added Tax (VAT), up from N1.20 trillion in Q4 of 2023.
When compared on a quarterly basis, this is a 19.21% rise.
This is in line with the National Bureau of Statistics’ (NBS) most recent report on VAT collection. Nigeria levies a VAT rate of 7.5% on a number of products and services.
The VAT collection grew to its current amount from N709.59 billion in comparison to the same quarter in 2023. This represents a 101.52% increase from the previous year.
In Q1 2024, local payments totalled N663.18 billion, foreign VAT payments amounted to N435.73 billion, and import VAT contributed N332.01 billion. There was a marginal increase of 5.27% in local VAT payment when compared to the figure for Q4, 2023.
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Increase in foreign and NCS import VAT collection
However, foreign VAT collection increased by 33.55% quarter-on-quarter from N326.26 billion in Q4 to the current figure. On a year-on-year basis, foreign VAT collection increased by 188.32%.
Furthermore, Nigeria Customs Service (NCS) import VAT rose by 36.05% between the fourth quarter of 2023 and the first quarter of 2024 from N244.04 billion to N332.00 billion. When compared to the corresponding quarter of 2023, this increased by 171.31%.
The significant rise in the VAT collection for foreign VAT payment and NCS import VAT stems from the weakening of the naira as the exchange rate rose from N907/$ to N1306/$ during the quarter and reached a peak of around N1600 to the USD on the official market.
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Growth rate across sectors
Quarter-on-quarter, the highest growth rates were recorded in accommodation and food service activities at 59.15%, followed by administrative and support activities at 47.79%.
Conversely, the lowest growth rates were in extraterritorial organizations and bodies at –57.01%, followed by human health and social work activities at –27.73%.
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Sectoral Contribution to VAT
In terms of sectoral contributions for Q1 2024, the top three sectors were Manufacturing at 26.72%, Information and Communication at 17.42%, and Mining & Quarrying at 15.42%.
On the other hand, the smallest contributions came from activities of households as employers and undifferentiated goods- and services-producing activities for household use, which recorded the least share at 0.01%.
This was followed by activities of extraterritorial organizations and bodies at 0.03%, and water supply, sewerage, waste management, and remediation activities at 0.05%.
The manufacturing sector has consistently topped the sectoral contribution to VAT despite the problems bedevilling the sector.
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Proposals to increase VAT rate
The World Bank and IMF have called on the federal government to increase the VAT rate as a strategy to boost non-oil revenue. The IMF had asked the federal government to increase the VAT rate from 7.5% to 10% in 2025 and 15% by 2026.
The Tinubu administration currently targets a revenue-to-GDP ratio increase from around 10% to 18% by 2026 and an increase in VAT rate is part of the agenda.
