Nigeria generated a sum of N496.39 billion revenue from Value Added Tax (VAT) in the first quarter of 2021, a surge of 52.93% year-on-year compared to N324.58 billion recorded in the corresponding period of 2020.
This is contained in the sectoral distribution of value added tax report, recently released by the National Bureau of Statistics (NBS).
According to the report, VAT collections in the period represents a 52.93% increase as against N324.58 billion recorded in Q1 2020; and a 9.17% increase compared to N454.7 billion recorded in the previous quarter.
The increase in VAT collections could be attributed to increased economic activity in the country, compared to the previous year, where most economic activities were put on hold as a result of the covid-19 pandemic.
Highlights
- Highlights of the report showed that the manufacturing sector generated the highest amount of VAT with N49.41 billion generated, closely followed by Professional Services, having generated N42.50 billion, and State Ministries & Parastatals, which generated N26.96 billion.
- Mining generated the least, closely followed by Pioneering, Textile & Garment Industry with N48.36 million, N77.01 million, and N289.41 million generated respectively.
- Also, out of the total amount generated in Q1 2021, N224.85 billion was generated as Non-Import VAT locally while N171.66 billion was generated as Non-Import VAT for foreign.
- The balance of N99.88 billion was generated as NCS-Import VAT.
Manufacturing sector topples professional services
The manufacturing sector toppled the professional services sector to lead the list of sectors with the highest VAT remittances in the first quarter of 2021. A total of N49.41 billion was collected as Value Added Tax from the manufacturing sector.
- Professional services followed closely, having remitted N42.5 billion in VAT to the government, State ministries and parastatals stood in third position with N26.96 billion VAT.
- Others on the list include; Commercial and trading sector with N22.8 billion, oil-producing (N15.8 billion), Transportation and haulage services (N14.9 billion), Breweries, bottling, and beverages (N11.9 billion).
- Federal ministries and parastatals (N8.8 billion), banks and financial institutions (N3.3 billion), and oil-marketing (N3 billion).
Why this matters
- The increase in VAT collection is a development in the right direction, especially given the recent positive growth recorded in global crude oil prices, indicating an increase in government revenue.
- However, the government needs to intensify its effort in creating innovative ways of increasing revenue given growing overheads and statutory spending, coupled with increasing debt profile.