Revenue Generation: VAT grows by 56% YoY, rises to N512.23 billion

The Nigerian government generated a sum of N512.23 billion as Value Added Tax (VAT) in the second quarter of the year (Q2 2021), representing a 56% increase compared to N327.2 billion recorded in the corresponding period of the previous year (Q2 2020).

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

According to the report, the latest figures also represent a 3.2% increase compared to N496.4 billion generated in the previous quarter.

READ: Nigeria’s VAT collection surges to N496.4 billion in Q1 2021

Highlights

• The manufacturing sector maintained the first spot, accounting for 8.76% of the total VAT collections by the government. A sum of N44.89 billion was received as VAT from the other manufacturing sector.
• Professional services followed with a sum of N29.3 billion, accounting for 5.72% of the total collections. Meanwhile, the sector recorded a 31% decrease in VAT remittance compared to N42.5 billion recorded in the previous quarter.
• The textile and garment industry recorded the least VAT remittance with N77.74 million, followed by pioneering with N168.99 million.
• Worthy of note is that the mining sector, which was at the bottom spot in the previous quarter, jumped by over 16,000% to the top 6. Its VAT remittances increased from N48.36 million in Q1 2021 to N8.11 billion in Q2 2021.

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

Out of the total amount generated in Q2 2021, N187.43 billion was generated as Non-Import VAT locally while N207.69 billion was generated as Non-Import VAT for foreign. The balance of N117.13 billion was generated as NCS-Import VAT.

Based on available data, Nigeria generated its highest ever quarterly value-added taxes. It is worth noting that the VAT collections started peaking in Q1 2020 after the federal government increased the VAT rate from 5% to 7.5% in January 2020.

Backstory

Nairametrics reported in May 2021 that Nigeria’s VAT collections surged by 52.93% year-on-year in Q1 2021, from N324.58 billion to N496.39 billion. The increase was attributed to increased economic activities in the country, as opposed to the comparable period of 2020 when economic activities were put on hold due to the covid-19 lockdown.

What this means

The increase recorded in VAT collection indicates increased economic activity in the country and shows optimism on the part of the revenue-generating ability of the federal government, especially at a time when oil revenues are not at their best.