by Oluwatunmise Omoseyin
Nigeria’s Value Added Tax (VAT) collection surged to N1.78 trillion in the third quarter of 2024, marking a substantial 88 per cent year-on-year increase compared to Q3 2023. The National Bureau of Statistics (NBS) reported the impressive figure in its latest VAT report, reflecting a 14.16 per cent quarter-on-quarter rise from N1.56 trillion in Q2 2024.
The VAT revenue was primarily driven by three key sectors: local VAT payments, which accounted for N922.87 billion; foreign VAT payments, contributing N448.85 billion; and import VAT, amounting to N410.62 billion.
The healthcare sector experienced the highest growth, with human health and social work activities seeing an exceptional increase of 250.39 per cent. Other notable contributors included activities related to household employment and undifferentiated goods and services, which grew by 102.09 per cent.
In terms of sectoral contributions, manufacturing led with a growth of 22.21 per cent, followed closely by the Information and Communication sector, which saw a 20.89 per cent increase. Mining and Quarrying activities grew by 18.90 per cent, while certain sectors, including household activities and extraterritorial organisations, contributed marginally, at 0.01 per cent each.
This growth comes at a time when the Nigerian government is seeking to enhance its tax revenue through reforms. A new tax reform bill currently under consideration in the National Assembly proposes a shift in the revenue-sharing model, introducing a derivation principle for VAT allocation.
Under the current system, 15 per cent of VAT revenue is allocated to the Federal Government, 50 per cent to states and the Federal Capital Territory (FCT), and 35 per cent to local governments. The new bill proposes that a portion of VAT revenue be allocated based on the principle of derivation, a move that has sparked strong opposition from governors and stakeholders in Northern Nigeria.
The increased VAT collections are a testament to the Federal Government’s efforts to strengthen its tax administration and improve compliance. However, the ongoing debates surrounding the new VAT sharing formula highlight the challenges in reconciling regional interests with national fiscal policies.
As discussions continue, the outcome of these proposed tax reforms could significantly impact the future distribution of VAT revenue across Nigeria’s various levels of government.
