Nigeria receives $9.68 billion capital inflows in 2020, lowest in 4 years

Nigeria generated a total sum of N1.53 trillion revenue from Value Added Tax (VAT) in 2020, up by 29.3% when compared to N1.18 trillion recorded in 2019.

This is contained in the Sectoral value-added tax report, recently released by the National Bureau of Statistics (NBS).

According to the report, VAT revenue grew by 29.3% compared to N1.18 trillion recorded in 2019 and 38.2% increase as against N1.11 trillion in 2018.

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Breakdown

• In 2020, professional services generated the highest amount of VAT with N162.32 billion remittances, closely followed by other manufacturing sectors with N154.15 billion.
• Non-import VAT generated locally grew by 30.5% in 2020 to stand at N763.01 billion as against N584.6 billion received in 2019.
• Non-import foreign VAT also stood at N420.4 billion. This indicates an increase of 17% when compared to N359.5 billion generated in the previous year.
• Import VAT generated by Nigeria Customs Service jumped by 44.6% to stand at N347.7 billion as against N240.5 billion recorded in 2019.
• Out of the twenty-eight (28) sectors, twenty-four (24) of them recorded positive growth in VAT remittance, while only four sectors recorded a decline in the period.
• VAT remittance by the transport and haulage services sector grew significantly by 78.8% to stand at N43.5 billion, closely followed by Agricultural and plantation sector with 65.4% increase to stand at N4.34 billion.

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Despite the economic downturn experienced by the country due to the lockdown measures put in place by the government in response to the Covid-19 pandemic and decline in global oil prices, VAT revenue increased significantly in the year. A development, which is largely attributable to the increase in VAT rate from 5% to 7.5% under the Finance Act implemented in February 2020.

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Professional Services overtakes Manufacturing sector

In 2019, other manufacturing sector topped the lists of sectors with the highest VAT remittances, with a total of N124.14 billion in VAT. However, professional services took over in 2020 with a 44.8% increase to stand top with a total VAT remittance of N162.32 billion.

Meanwhile, other manufacturing followed with N154.2 billion, Commercial and trading with N77.4 billion, Breweries, bottling, and beverages at N59.7 billion, while State ministries and parastatals remitted a total of N59 billion in value-added taxes.

Other sectors that made up Nigeria’s top 10 biggest VAT sources during the period include, transport and haulage services (N43.5 billion), oil-producing (N43.4 billion), Federal ministries and parastatals (N26.3 billion), Banks and financial institutions (24.8 billion), and finally a sector not classified with N22.9 billion remittance.

On the flip side, mining generated the lowest VAT with N250.9 million remittance, followed by the textile and garment industry (N1.19 billion), pharmaceutical, soaps and toiletries (N1.4 billion), local government councils (N1.9 million), and publishing, printing, paper packaging (N2.08 billion).

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VAT is growing but still not enough

Recall that in the 2019 budget, Nigeria projected a total Value Added Tax revenue of N1.7 trillion as it anticipated higher tax revenues from vatable goods and services but achieved 69.8% of the target as generated a sum of N1.18 trillion during the period.

Similarly, the federal government only achieved 75.4% of the targeted N2.03 VAT revenue in 2020, having generated a total of N1.53 trillion. We can also recall that the recently signed 2021 budget puts Nigeria’s overall budget deficit at N5.6 trillion, which is expected to be funded through both domestic and foreign borrowings.

With oil prices still around $50 per barrel and the resurgent cases of covid-19 worldwide, which puts pressure on Nigeria’s oil revenue as the country aims to recover from the pandemic induced recession.

READ: A look at how much Nigerian banks paid their staff in 9-month 2020

Bottom line

The increase in VAT collection is a welcome development to the Nigerian government but needs to intensify effort in creating innovative ways of increasing revenue given growing overheads and statutory spending, coupled with increasing debt profile.