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FIRS Reports 19.21% Increase in VAT Revenue to N1.43 Trillion – NBS

The Federal Inland Revenue Service (FIRS) reported a significant increase in Value Added Tax (VAT) revenue, which rose by 19.21% from N1.20 trillion in Q4 2023 to N1.43 trillion in the first quarter of 2024, according to the latest report from the National Bureau of Statistics (NBS). This boost in VAT collection reflects Nigeria’s 7.5% VAT rate on certain goods and services.

Compared to the same period in 2023, VAT revenue soared by 101.52%, rising from N709.59 billion to the current figure. In Q1 2024, local VAT payments totaled N663.18 billion, foreign VAT payments reached N435.73 billion, and import VAT contributed N332.01 billion. Local VAT payments saw a slight increase of 5.27% from Q4 2023.

Foreign VAT collection saw a notable rise of 33.55% quarter-on-quarter, increasing from N326.26 billion in Q4 2023 to N435.73 billion in Q1 2024, with a year-on-year increase of 188.32%. The Nigeria Customs Service (NCS) import VAT also grew by 36.05%, from N244.04 billion in Q4 2023 to N332.00 billion in Q1 2024, marking a 171.31% increase compared to Q1 2023. This significant growth in foreign VAT payments and NCS import VAT is attributed to the depreciation of the naira, with the exchange rate rising from N907/$ to N1306/$ and reaching around N1600 to the USD in the official market.

The highest growth rates quarter-on-quarter were recorded in the accommodation and food service activities sector, which grew by 59.15%, followed by administrative and support services, which increased by 47.79%. Conversely, extraterritorial organizations and bodies experienced the lowest growth at –57.01%, followed by the human health and social work activities sector at –27.73%.

In Q1 2024, the leading sectors in VAT contributions were Manufacturing at 26.72%, Information and Communication at 17.42%, and Mining & Quarrying at 15.42%. The sectors with the smallest contributions were activities of households as employers and undifferentiated goods- and services-producing activities for household use at 0.01%, followed by extraterritorial organizations and bodies at 0.03%, and water supply, sewerage, waste management, and remediation activities at 0.05%.

Despite various challenges, the manufacturing sector has consistently been the top contributor to VAT.

Both the World Bank and the International Monetary Fund (IMF) have advised the Nigerian government to raise the VAT rate as a strategy to enhance non-oil revenue. The IMF recommended increasing the VAT rate from 7.5% to 10% by 2025 and further to 15% by 2026. The administration of President Bola Tinubu aims to boost the revenue-to-GDP ratio from approximately 10% to 18% by 2026, with an increased VAT rate being a crucial part of this plan.