Improved economic condition witnessed in the Nigerian economy in 2018 has paid off as the federal government recorded N1.10 trillion in total value added tax (VAT) generation, highest value in six (6) years.
According to the National Bureau of Statistics (NBS), total VAT value appreciated by 14 percent from N972.35 billion in 2017.
However, this is a slowdown in growth compared to a 25 percent growth in VAT recorded in 2017.
Statistics have shown that there exists a strong correlation between economic growth and VAT revenue growth.
The slowdown was largely contributed to by a decline in VAT revenue in Q2 2018 due to decelerating growth in GDP also in Q2.
Analysis of quarter on quarter (Q/Q) trend in VAT in 2018 revealed that while the economy slowed down in Q2 to 1.5 percent from 1.92 percent in Q1, VAT revenue declined marginally by 1 percent.
2018 VAT levels signaled improved consumer spending and consumption in 2018 as statistically there has been a strong correlation in the movement of household spending and VAT revenue generated.
In 2016, according to data from World Data Indicator (WDI), while household spending declined 18 percent VAT revenue grew marginally by 2 percent against 54 percent growth in the previous year.
Decline in household expense improve however in 2017 and we saw VAT revenue surge by 25 percent. Although, household spending in 2018 isn’t available, we estimate improved spending.
According to NBS report, other manufacturing maintained being the highest contributor to VAT generation as it accounted for 11 percent of the total value. VAT generated from the sector amounted to N122.89 billion.
Growth in other manufacturing sector classification y/y stood at 2.76 percent, making the sector seat at the bottom of the sector growth chart.
However, y/y growth amongst the sectorial distributions shows that VAT generated from local government councils grew the highest by 140.33 percent to N1.5 billion, leading the chart.
Others includes Stevedoring, clearing and forwarding (38.46%), Properties & Investments (35.46%), Pioneering (35.36%), and Mining (34.75%); making the top five sectors on the chart.
