Nigeria’s VAT Collection Reaches Record N1.78 Trillion In Q3 2024.
The Nigerian government has achieved a remarkable milestone, collecting a total of N1.78 trillion in Value Added Tax (VAT) during the third quarter of 2024, according to a report released by the National Bureau of Statistics (NBS).
This represents a 14.16% quarter-on-quarter increase compared to the N1.56 trillion collected in Q2 2024 and an impressive 88% year-on-year growth from Q3 2023.
The report highlighted three key revenue streams contributing to the N1.78 trillion VAT collections:
– Local VAT Payments: N922.87 billion
– Foreign VAT Payments: N448.85 billion
– Import VAT: N410.62 billion
Human health and social work activities recorded the highest growth rate, surging by 250.39% quarter-on-quarter. This was followed by activities of households as employers and undifferentiated goods and services-producing activities for household use, which grew by 102.09%.
In contrast, some sectors experienced declines. Water supply, sewerage, waste management, and remediation activities fell by 41.92%, the steepest drop among all sectors. Similarly, activities of extraterritorial organisations and bodies declined by 36.14%.
In terms of contribution to the overall VAT pool:
– Manufacturing accounted for 22.21% of total VAT revenue.
– Information and Communication contributed 20.89%.
– Mining and Quarrying followed with 18.90%.
At the lower end, activities of households as employers and undifferentiated household activities, alongside extraterritorial organisations and bodies, each contributed 0.01%, while water supply, sewerage, waste management, and remediation activities accounted for 0.03%.
The significant rise in VAT collections comes amidst ongoing debates surrounding proposed changes to the revenue-sharing formula under new tax reform bills being reviewed by the National Assembly.
Currently, VAT revenue is distributed as follows:
– 15% to the Federal Government
– 50% to States and the Federal Capital Territory (FCT)
– 35% to Local Governments
The existing formula also incorporates a derivation principle, ensuring at least 20% of VAT revenue is allocated to states based on their contributions. Additional factors influencing distribution include 50% based on equality and 30% based on population.
However, the proposed reforms aim to expand the derivation principle, which has met resistance from the Northern Governors’ Forum, traditional rulers, and stakeholders. Lawmakers from the Northern region have largely aligned with this opposition.
The record VAT collections underscore the government’s ongoing efforts to improve tax administration and compliance. If the proposed reforms are implemented, they could reshape Nigeria’s revenue allocation system, potentially impacting the fiscal dynamics between federal and sub-national entities.
As Nigeria continues to grapple with its fiscal challenges, the success of these reforms and sustained revenue growth could play a pivotal role in strengthening the nation’s economy.
