Manufacturing and information technology as well as mining and quarrying have emerged as the top three sources of VAT revenues for Nigeria according to the most recent data from the National Bureau of Statistics .
The other top sources of VAT revenues for the government are Public admin & defense as well as financial services and wholesale & retail.
According to a research report by FBNquest, in terms of year on year comparison, the growth in VAT revenues was more pronounced as it rose by a staggering 88% compared to the previous year.
The sequential increase in VAT collection was driven by higher VAT collections across all revenue items. Domestic (non-import) VAT revenue was the key driver of the q/q growth, accounting for almost 52% of total revenue.
Its VAT receipts amounted to NGN922.9bn, compared with NGN792.6bn received in the previous quarter.
Foreign (non-import) and import VAT, which represent about 25% and 23% of total VAT receipts, increased by 13% q/q and 10% q/q to NGN448.9bn and NGN410bn, respectively.
Regarding the sectoral contribution of VAT, the manufacturing sector emerged as the largest source of revenue, with VAT receipts of almost NGN205bn.
Read also: Oyedele backs governors’ VAT revision, says ‘reforms are journey, not a leap’
The information and communication (ICT) sector ranked as the second-largest contributor to total VAT revenue, generating about NGN192.8bn during the quarter.
The mining and quarrying, and public administration and defence sectors complete the list with a VAT revenue contribution of NGN174.4bn and NGN95.9bn, respectively.
Overall, the total collection in Q3 indicates gross VAT collections of NGN4.8trn over the 9M ’24 period, double the NGN2.4trn received in the corresponding period of 2023.
The robust expansion in VAT revenue was driven by exchange rate gains and enhanced tax administration.
Despite the improvement in VAT revenue, Nigeria’s revenue-to-GDP ratio has continued to hover around 7% – 9%, which is considerably low compared to other emerging and developing countries.
That said, the current administration plans to introduce a series of tax reforms, which aim to reduce tax expenditures, broaden the tax net, and improve VAT revenue.
The implementation of these initiatives is expected to boost fiscal revenues and increase the country’s low revenue-to-GDP ratio.
The data also show that Nigeria’s gross collections from Vat increased by 14% quarter on quarter in Q3 of 2024 to N1.8trn.
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