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Macro-Economic News

Nigeria generates N1.53 trillion VAT in 2020, grows by 29%

VAT revenue grew by 29.3% compared to N1.18 trillion recorded in 2019 as professional services sector tops with N162.3 billion remittance

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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.

READ: CBN advises government to adopt “Big Bang approach” to fixing economy

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.

READ: Nigeria’s VAT Increase: Penny-Wise, Pound Foolish

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.

READ: Nigeria’s records 6.1 percent tax to GDP as tax base for VAT rise to N23.7 trillion

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).

READ: Nigeria spends N29 trillion on recurrent (non-debt) expenditure in last 10 years

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.

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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.

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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.

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1 Comment

1 Comment

  1. Anonymous

    January 27, 2021 at 6:26 pm

    Many thanks for this information.

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Macro-Economic News

Transport fare watch: Motorcycle “Okada” commuters paid less in January 2021

Commuters on motorcycle per drop (Okada) paid less in January 2021 than they did in December 2020.

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Transport fare for motorcycle "Okada" more than doubled in 2020, Lagos State bans Gokada, ORide, MaxNG, others from 15 local governments 

The average fare paid by commuters for journey by motorcycle per drop decreased by 11.60% month-on-month and increased by 95.22% year-on-year to N259.33 in January 2021 from N293.36 in December 2020, according to the National Bureau of Statistics (NBS) report for the month of January 2021.

According to the report, commuters in  Taraba (N400.80), Yobe (N400.15) and Rivers (N400.00) paid the highest journey fare by motorcycle per drop while commuters in Adamawa (N84.22), Katsina (N134.90) and Kebbi (N152.05) paid the lowest journey fare by motorcycle per drop.

READ: Transport Fare: Motorcycle “Okada” commuters paid more in November

Other key highlights

  • The average fare paid by commuters for bus journey intercity decreased by 0.25% month-on-month and increased by 39.55% year-on-year to N2,346.41 in January 2021 from N2,352.19 in December 2020.
  • Commuters in Abuja FCT (N4,482.24), Lagos (N3,300.23) and Sokoto (N3,300.00) paid the highest bus journey fare intercity while commuters in Bayelsa (N1,600.45), Bauchi (N1,640.20) and Enugu (N1,687.45) paid the lowest bus journey fare within city.
  • The average fare paid by commuters for bus journey within the city decreased by 0.66% month-on-month and increased by 74.75% year-on-year to N352.15 in January 2021 from N354.49 in December 2020.
  • Commuters in Zamfara (N600.00), Bauchi (N522.75) and Ekiti (N458.77) paid the highest bus journey fare within city while commuters in Oyo (N189.46), Abia (N205.22) and Borno (N240.79) paid the lowest bus journey fare within city.
  • The average fare paid by air passengers for specified routes single journey increased by 0.02% month-on-month and by 18.27% year-on-year to N36,463.65 in January 2021 from N36,454.59 in December 2020.
  • Passengers in Anambra (N38,600.00), Cross River/Jigawa/Lagos (N38,500.00), Bauchi (N38,400.00) paid the highest airfare while States with lowest airfare were Akwa Ibom (N32,450.00), Sokoto (N33,700.00), and Gombe (N35,000.00).
  • The average fare paid by passengers for water way passenger transport increased by 3.68% month-on-month and by 38.58% year-on-year to N786.19 in January 2021 from N758.27 in December 2020.
  • Passengers in Rivers (N2,280.00), Delta (N2,250.45) and Bayelsa (N2,200.10) paid the highest fare by water while states with lowest fare by waterway passenger transport were Borno (N245.10), Gombe (N290.77) and Kebbi (N340.00).

READ: Transport fare for motorcycle “Okada” more than doubled in 2020

Why this matters

Transportation cost takes a huge portion of budget for most lower/middle-class Nigerians and as well takes not less than 20% of their take-home pay packages.

The drop in fares paid by the commuters on motorcycle per drop (Okada) is a welcome development.

Transport by motorcycle (Okada) has been popularly adopted in most cities by businessmen, government workers, and students to overcome traffic congestion, and for the advantage that it can navigate roads that are inaccessible to automobiles and buses, particularly in villages and urban slums.

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Macro-Economic News

The moment Emefiele predicted Nigeria will be out of recession in Q4 2020

The CBN Governor had expressed optimism last year that the country was going to come out of recession in Q4 of 2020.

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parallel market, Covid-19: N3.5 trillion disbursed as stimulus package for the Nigerian economy, CBN Vs NESG: Waving the white flag for the benefit of Nigerians, Exchange Rate Unification: CBN devalues official rate to N380/$1, Nigerian banks have written off N1.9 trillion impaired loans in past 4 years, CBN sandbox operations, Stirling Trust Company Limited, Key highlights of the October 2020 Business Expectations Survey Report, A Total of N3.5 trillion was disbursed in the wake of the COVID-19 pandemic, in addition to several other interventions to reflate the economy - CBN, BOFIA 2020: Steps forward or backwards for Nigerian banks, Total credit to the economy rose to N19.54trillion – CBN Governor

It is no longer news that Nigeria, Africa’s largest economy, against all expectations exited recession as its Gross Domestic Product (GDP) grew by 0.11% in the last quarter of 2020 (year on year).

However, the Governor of the Central Bank of Nigeria, Godwin Emefiele, had expressed optimism last year that the country was going to come out of recession in the fourth quarter of 2020.

According to the report released by the National Bureau of Statistics (NBS), this is the first positive quarterly growth in the last 3 quarters following growth in telecommunications and agriculture which seem to make up for the sharp drop in oil prices and production.

The surprising rebound of the Nigerian economy is coming against the prediction of the country’s Minister for Finance, Budget and National Planning, Zainab Ahmed, who while speaking at the 26th Nigerian Economic Summit, said that Nigeria is expected to exit recession by the first quarter of 2021.

The CBN Governor had during the November 2020 Monetary Policy Committee meeting, predicted that the country was going to come out of recession by the fourth quarter of 2020.

This as he said that many analysts expressed doubts about that and were waiting to prove him wrong.

In a video during a press conference as seen by Nairametrics, Emefiele said, “You said that in November MPC, I was cautiously optimistic that fourth-quarter GDP will be positive thereby taking Nigeria out of a recession that I was aggressively optimistic that during the first quarter, we will exit recession. I am praying very seriously that my prayer should be heard because I know that people are waiting to put my neck on the chopping board to say that I do not know my work.’’

What you should know

  • Despite Nigeria’s surprise exit from recession, experts have still expressed their reservations about the country’s weak economy which is faced with several challenges for businesses ranging from foreign exchange pressure, high unemployment level, increasing consumer prices, serious security challenges, weak investor confidence, etc.
  • This is as the growth in GDP was primarily driven by the Information and Communication sector and the Agricultural sector.
  • However, the surprise rebound of the economy means that Nigeria may recover faster than expected as crude oil prices and production increase this year.
  • This also shows that the country needs to redouble its efforts in the growth of the non-oil sector which contributed 94.13% to Nigeria’s GDP.

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