The drive to improve the government’s non-oil revenue generation got some boost as Nigeria’s Value Added Tax(VAT) rose to N600.15 billion at the end of the second quarter of 2022, data from the National Bureau of Statistics (NBS) have shown.
In Q2 2021, the total VAT realised was N512.25 billion, implying that the second quarter VAT was higher by 17.2 percent on a year on year basis and 1.96 percent when compared to N588. 60 billion realised in the first three months of this year. This effectively puts the VAT realised in the first half of this year at N1.1 trillion as against N1 trillion in the corresponding period of 2021.
“In the aggregate, Value Added Tax (VAT) for Q2 2022 was reported at N600.15 billion, showing a growth rate of 1.96% on a quarter-on-quarter basis from N588.59 billion in Q1 2022. Local payments recorded were N359.12 billion, while Foreign VAT Payment contributed N111.13 billion in Q2 2022. In terms of sectoral contributions, the top three largest shares in Q2 2022 were manufacturing with 33.08%; information and communication with 18.98%; and mining & quarrying with 10.60%,” NBS report stated.
Africa’s largest producer of crude oil has not been able to reap from the global windfall from crude oil due to crude oil theft and subsidy on petroleum products. Consequently, Nigeria’s fiscal position worsened in 2022 with the country recording N3.09 trillion fiscal deficits from January to April of this year. This is as the cost of additional borrowings has spiked due to the hawkish stance of most central banks of the world. The Nigerian central bank recently hiked the benchmark interest rate to 14 percent in July.
Nigeria’s Q2 2022 real GDP growth rate of 3.54 percent beat many analysts’ expectations surpassing the 3.11 percent real growth in the previous quarter. In July, headline inflation raced to 19.6 percent, a development that made many stakeholders to project further rate hike above the current 14 percent by the Central Bank of Nigeria.
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On a quarter on quarter basis, the highest growth in VAT came from the utilities sub sector comprising electricity, gas, steam and air conditioning supply where a total of N3.97 billion VAT was realised in Q2 2022 as against N1.83 billion in Q1 2022. Growth in VAT in this sub sector was 116.5 percent quarter on quarter.
Distribution companies have improved revenue generation in recent times. Industry revenue rose from N526.77 billion in 2020 to N761.17 billion in 2021. In the first three months of 2022, Nigeria’s electricity distribution companies realised N777 billion as revenue, according to the data provided by the Association of Nigerian Electricity Distributors (ANED).
VAT generated in the accommodation and food service activities sub sector increased by 42.4 percent to N5.24 billion in Q2 2022 as against N3.68 billion in Q1 2022. Also, a total of N32.11 billion VAT was generated in public administration and defence, compulsory social security sub-sector which represented an increase of 28.2 percent when compared to N25.00 billion realised in Q1 2022.
The GDP of the accommodation and food services sub sector grew by 3.30 percent at the end of the second quarter of 2022, far higher than the real growth of 1.93 percent in Q1. In addition, BusinessDay had earlier reported that the housing market in Nigeria would witness an uptick in rent payment, caused by the spiralling inflation rate which significantly resulted in an upward trend in the prices of building materials in the country.
VAT generated from agriculture, forestry and fishing amounted to N1.05 billion, representing an increase of 26.5 percent when compared to N827.58 million made in Q1 2022. This came amidst the not too impressive real GDP growth rate of 1.20 percent in Q2 2022 compared to 3.16 percent real growth in Q1 2022.
Other sub-sectors that recorded double digit growth rates in VAT on a quarter on quarter basis are information and communication, 15.9 percent; real estate,14,9 percent; transportation and storage, 14.2 percent, as well as wholesale and retail trade, 13.2 percent.
Meanwhile, the VAT from the manufacturing sub sector grew by just 5.2 percent in Q2 2022. This is a sub-sector that accounted for 33.1 percent of the local VAT and 19.8 percent of the total VAT in Q2, 2022. The GDP of the manufacturing sub sector grew by 3 percent in Q2 2022, down from 5.89 percent in Q1 2022.
Notwithstanding, six sub sectors witnessed a huge drop in the VAT collected during Q2 2022. These sub sectors are water supply, sewage and waste management which saw its Q2 VAT drop by 15.1 percent; other service activities, 16 percent; financial and insurance activities,23.7 percent; administrative and support service activities, 30.3 percent; activities of households, 36.6 percent, and activities of extraterritorial organisations, 42.4 percent. Altogether, VAT collected from these sectors fell by N11.8 billion in Q2 compared to Q1 2022.
