The Value Added Tax (VAT) paid by Nigerians increased from N1.20 trillion in Q4, 2023 to N1.43 trillion in the first three months of 2024.
This represents an increase of 19.21% when compared quarter-on-quarter.
This is according to the latest VAT collection report published by the National Bureau of Statistics (NBS). Nigeria charges a 7.5% VAT rate on specific goods and services.
When compared with the corresponding quarter of 2023, the VAT collection increased from N709.59 billion to its current figure. This denotes a year-on-year increase of 101.52%.
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.
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.
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%.
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.
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.
