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Ten facts, figures about Nigeria’s VAT

Nigerian states have been locking horns with the Federal Government since a Federal High Court in Port Harcourt ruled last month that states, and not the Federal Inland Revenue Service (FIRS), should be collecting value-added tax (VAT).

The lack of equity in the sharing of the VAT revue is why states are now pushing for the first time to enact laws that give them the right to collect the tax within their jurisdictions.

While Lagos is estimated to contribute about 55 percent to local VAT, findings by BusinessDay show that it is only allocated 15 percent of the total collected revenue from the consumption tax.

The majority of the states that contribute less to the VAT pool are usually allocated a larger share than their contributions.

Lagos and some others that contribute the most to VAT are convinced that being in charge of the tax collection would lead to an increase in revenue and an increase in infrastructure development in the states.

Below are some facts and figures about VAT in Nigeria


VAT which is one of the sources of government revenue generation in Nigeria is a consumption tax payable on goods and services purchased by individuals, government agencies, and business organisations. This type of tax is paid indirectly by a consumer to the supplier of the product or service consumed.

Who has the legal right to collect VAT?

Item 62, Part 1, 2nd Schedule of the 1999 (constitution as amended) and the VAT Act, Cap. V1, LFN, 2004 (as amended by the Finance Act, 2020), stated that states are empowered to collect VAT.

The power of the federal government on taxes is limited to the profits/income of persons/companies, capital gains, and stamp duties on instruments but does not extend to VAT as attested to by a Federal High Court judgment delivered on December 11, 2020, in a case between Emmanuel Chukwuka Ukala v. FIRS.

“Based on the constitution, consumption tax belongs to the states and don’t think that anyone is debating that,” Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader at PwC said.

According to Oyedele, when the VAT law was introduced in1993 there was an understanding that the Federal Government had the capacity to collect the tax. “At the time, even Lagos state did not have the capacity to collect. So, FG was only collecting on behalf of the state and then keeping a percentage of the state to cover the cost of collecting.”

READ ALSO: Northern Nigeria Flour Mills declares N70m profit after tax


Replacing the sales tax introduced via Decree 7 of 1986, VAT was introduced in Nigeria via Decree 102 of 1993 and implementation began in 1994. According to a PwC survey, since its introduction almost 3 decades ago, VAT has become the fastest-growing tax revenue head in Nigeria displacing PPT (N1.52 trillion) and CIT (N1.41 trillion) in 2020 to claim the top spot at N1.53 trillion.


Currently, section 40 of the VAT Act requires that the VAT pool be shared 50 percent to states. With this sharing formula, about 30 states which account for less than 20 percent of VAT collection are tapping from their counterparts that generate 80 percent of the VAT revenue.


The Nigerian VAT act has been amended several times and some of the key changes that have been made include exemption threshold for small businesses with annual turnover not exceeding N25m, a requirement for foreign suppliers to charge VAT, self-charging of VAT, exclusion of rent, land, and building from the scope of VAT and among other.

States with highest/lowest VAT contribution

States that contribute some of the highest portions to the VAT pool are Lagos (50.5%), FCT (13.2%), Oyo (2.9%), Rivers (2.7%), and Kano (1.4%). The bottom 32 states contributed only 7% with the bottom 3 being Abia (0.08%), Osun (0.07%), and Zamfara (0.06%). On the other hand, amounts shared by the top states & their LGs are Lagos (14.7%), Kano (3.8%), Oyo (3.2%), Rivers (2.7%), and FCT (2.5%). The bottom 3 states share Osun (2%), Abia (1.6%), and Zamfara (1.6%).

500 food items

More than 500 food items are estimated to be exempted from the national VAT. Some of which include bread, cereal, fish, milk, fruits, yam, and water. Also, education books and materials, tuition, medical services, shared passenger transport, commercial air travel, and rent are exempted.


VAT generated by FG in the second quarter of 2021 was N512.25 billion, as gathered from the Q2 2021 sectoral distribution of VAT by the National Bureau of Statistics (NBS). This was an improvement of 3.2 percent compared to N496.39 billion made in the first quarter of the year.

The top contributing sectors, according to Oyedele are professional services & telecoms contributing about 10.6 percent, other manufacturing (10.07%), commercial & trading (5.06%), breweries, bottling & beverages (3.90%), transport & haulage (2.84%).


Industry survey shows that some big sectors contribute very little to VAT revenue due to the nature of their operations e.g., banks & financial institutions contribute about 1.62 percent. This is because VAT is only charged on a small component of their income such as fees & commission but not on interest or premium. Oil marketing is said to contribute less than 1 percent due to the fact that VAT is not charged on petroleum products.


If FG’s current allocation method is reviewed and states that contribute the highest VAT are allocated a larger pool of the revenue, the states will most likely forgo their push to collect the VAT themselves, according to tax analysts.

This is because many states are already bearing the burden of collecting other taxes and they are yet to make much progress in seamlessly collecting the revenue, they said.

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