Nigeria generated a sum of N2.07 trillion as Value Added Tax (VAT) revenue for the year 2021, which is the highest VAT revenue ever recorded since we started tracking the data at Nairametrics.
This is contained in the 2021 VAT report, released by the National Bureau of Statistics (NBS).
According to the report, Nigeria’s VAT revenue jumped by 35.4% in 2021 to N2.07 trillion from N1.53 trillion recorded in the previous year. It also represents a 75% increase compared to N1.18 trillion collected as VAT in 2019.
Notably, since the implementation of the increment in VAT rate from 5% to 7.5% in February 2020, Nigeria’s VAT revenue has recorded a significant surge, further improving the federal government’s non-oil revenue.
- A total of N1.04 trillion was collected as local non-import VAT, which accounts for 50.2% of the total VAT revenue for the period under review.
- On the other hand. Foreign non-import VAT accounted for 27.2% of the collections in 2021 with N564.12 billion.
- Meanwhile, import VAT from the Nigerian Customs Service (NCS) totalled N467.68 billion, representing 22.6% of the VAT revenue.
- A disaggregated breakdown of the data shows that the highest quarterly VAT was generated in Q4 2021, which is also the highest ever VAT revenue by Nigeria for any quarter.
- A sum of N512.25 billion was generated in Q2 2021, N500.49 billion in Q3 2021, while N496.39 billion was collected in the first quarter of the year.
The Federal Inland Revenue Service is improving its tax collections, with its company income tax revenue also increasing by 3.6% to N1.69 billion in the same period compared to N1.41 trillion recorded in the previous year.
A cursory look at the Q3 2021 budget implementation report released by the Budget Office of the Federation, Nigeria’s non-oil revenue for the third quarter outperformed the corresponding period of 2020 by 26.1% with a gross non-oil revue of N1.35 trillion as against the N1.1 trillion in Q3 2020.
Also, the N1.35 trillion gross non-oil revenue in Q3 2021, represents an increase of 16.92% above the quarterly estimate of N1.15 trillion. A breakdown of the non-oil revenue items showed that except for Special Levies (Federation Account) all the other non-oil revenue items were above their quarterly projections.
Value Added Tax of N500.49 billion, Company Income Tax of N473.01 billion and Customs & Excise Duties of N345.57 billion collected in Q3 2021 were above their quarterly estimates of N459.59 billion, N374.13 billion, and N283.13 billion respectively.
Highest contributing sectors to VAT
Due to the recategorization of the sectoral VAT payments by the National Bureau of Statistics (NBS), consideration will be given to the second half of the year.
- The manufacturing sector remitted the highest VAT of N194.1 billion between July and December 2021, accounting for 30.9% of the total non-import VAT collected by the federal government in the period.
- Second on the list is the information and communication sector with N121.6 billion (19.3%), followed by the mining and quarrying sector with N61.47 billion (9.8%).
- Public administration, defence, and compulsory social security sector remitted a sum of N55.82 billion as value-added tax in H2 2021, accounting for 8.9%, while the financial and insurance sector accounted for 8.1% of the total local non-import tax with N50.9 billion remittance.
Why this matters
The Nigerian government revenue bucket is basically divided into two broad categories, oil and non-oil revenue. Nigeria’s oil revenue has been underperforming in recent years, which informed the need to improve the non-oil revenue, as the government do not have much control on the income from the sales of crude oil.
The value-added tax is a very important source of non-oil revenue for the government, accounting for over 40% of the country’s net non-oil receipts, which is why some state governments are contending with the federal government to collect their own value-added taxes.
Meanwhile, the minister of finance, Zainab Ahmed has stated that Nigeria will prioritise tax collection from its digital economy in 2022 and focus on non-resident firms with significant economic presence and generate turnover in the country.