The Value Added Tax (VAT) collected in Nigeria saw a significant increase in the first quarter of 2024, rising by 19.21% from the previous quarter, according to the latest report from the National Bureau of Statistics (NBS). VAT revenue reached N1.43 trillion, up from N1.20 trillion in Q4 2023.
This substantial growth highlights a strong upward trend in tax revenue, reflecting enhanced compliance and economic activity. The NBS report indicates that VAT, charged at a rate of 7.5% on specific goods and services, has seen a year-on-year increase of 101.52%, doubling from N709.59 billion in Q1 2023.
Breakdown of VAT Contributions
In the first quarter of 2024, local VAT payments amounted to N663.18 billion, while foreign VAT payments and import VAT contributed N435.73 billion and N332.01 billion, respectively. Local VAT payments saw a modest quarter-on-quarter increase of 5.27%.
The most notable increases were in foreign VAT collection, which surged by 33.55% quarter-on-quarter and by 188.32% year-on-year. Import VAT, collected by the Nigeria Customs Service (NCS), also saw a significant rise of 36.05% from the previous quarter and a 171.31% increase from Q1 2023. These increases are attributed to the weakening naira, which saw exchange rates rise from N907/$ to N1306/$, peaking at around N1600/$ during the quarter.
Sectoral Growth and Contributions
The highest quarter-on-quarter growth rates were recorded in the accommodation and food service activities sector at 59.15%, followed by administrative and support activities at 47.79%. Conversely, the lowest growth rates were observed in extraterritorial organizations and bodies at -57.01% and human health and social work activities at -27.73%.
In terms of sectoral contributions, the top three sectors were Manufacturing (26.72%), Information and Communication (17.42%), and Mining & Quarrying (15.42%). The smallest contributions came from the activities of households as employers and undifferentiated goods- and services-producing activities for household use at 0.01%, followed by extraterritorial organizations and bodies at 0.03%, and water supply, sewerage, waste management, and remediation activities at 0.05%.
Future VAT Rate Proposals
The World Bank and International Monetary Fund (IMF) have recommended increasing Nigeria’s VAT rate to boost non-oil revenue. The IMF suggests raising the VAT rate from 7.5% to 10% in 2025 and to 15% by 2026. The Tinubu administration aims to increase the revenue-to-GDP ratio from around 10% to 18% by 2026, with an increase in the VAT rate being part of this agenda.
The NBS report underscores the importance of VAT as a significant revenue source for Nigeria, reflecting both the challenges and opportunities in tax collection and economic policy.
