VAT reform will reduce manufacturing costs by 3.3% - Oyedele

A planned change to Nigeria’s Value Added Tax (VAT) system could help manufacturers save money, lowering their costs by about 3.3 per cent.

Taiwo Oyedele, who leads the Presidential Tax Reform Committee, shared this information in a post called ‘Impact of Proposed VAT Reform on Cost Budget.’ He explained this after meeting with business leaders from the Organised Private Sector of Nigeria (OPSN). Many companies are worried about higher costs, but Oyedele says the changes will actually save them money.

“We had a very productive session with the OPSN hosted by the Manufacturers Association of Nigeria (MAN),” Oyedele said.

“A participant who works for a manufacturing company asked to know when the reforms are likely to take effect and whether to include higher costs due to the proposed VAT rate increase in the company’s 2025 budget. This question reflects the general perception of the VAT reforms, whereas the overall impact is actually a cost reduction.”

Oyedele then broke down how different business expenses would be affected. He explained that manufacturers wouldn’t pay more for raw materials because they can claim back the VAT, just like before. The same goes for manufacturing equipment, training costs, and several other business expenses. Salaries won’t be affected because they don’t have VAT anyway. Companies will now be able to claim VAT back on things like professional fees, communications, and marketing costs, which they couldn’t do before.

He explained that these savings come from comparing how companies can deduct taxes under the current system versus how they’ll be able to claim VAT refunds under the new system, even with higher rates.