Nigeria’s economy witnessed a significant boost in Value Added Tax (VAT) revenue during the third quarter of 2024. Collections reached a staggering N1.78 trillion, marking a substantial increase of 14.16% compared to the N1.56 trillion collected in Q2 2024. This surge also represents a remarkable 88% year-on-year growth from Q3 2023. This article delves into the details of this revenue increase, exploring the contributing sectors and the broader economic implications.
- VAT revenue jumped to N1.78 trillion in Q3 2024.
- This represents a 14.16% increase compared to Q2 2024 and an 88% increase compared to Q3 2023.
- Manufacturing remains a key contributor to VAT revenue.
- Local payments, foreign VAT payments, and import VAT all saw significant contributions.
VAT Revenue Breakdown
The National Bureau of Statistics (NBS) released the VAT data, revealing the breakdown of the N1.78 trillion collected in Q3 2024:
- Local payments: N922.87 billion
- Foreign VAT payments: N448.85 billion
- Import VAT: N410.62 billion
Sectoral Performance and Growth
High-Growth Sectors
Certain sectors experienced remarkable growth in VAT contributions. The human health and social work activities sector saw a staggering 250.39% increase, the highest among all sectors. Activities of households as employers and undifferentiated goods and services also saw significant growth, contributing 102.09%.
Low-Growth Sectors
Conversely, some sectors recorded negative growth. The water supply, sewerage, waste management, and remediation activities sector experienced a -41.92% decline, the lowest growth rate. Activities of extraterritorial organizations and bodies followed with a -36.14% decline.
Key Contributors
Manufacturing continued to be a major contributor, accounting for 22.21% of the total VAT revenue collected in Q3 2024. This highlights the importance of the manufacturing sector to Nigeria’s economy.
Economic Implications
This surge in VAT revenue signifies positive economic activity and improved tax compliance. It also offers the government more resources for public spending and infrastructure development, which can further boost economic growth.
Looking Ahead
While the increase in VAT revenue is encouraging, maintaining this growth trajectory requires sustained efforts. The government must continue to strengthen tax administration, broaden the tax base, and create a conducive environment for businesses to thrive. It’s also crucial to ensure efficient allocation of these funds towards productive sectors that will contribute to long-term economic prosperity.
Nigeria’s Tax System: A Brief Overview
Nigeria operates a Value Added Tax (VAT) system, which is a consumption tax levied on goods and services. The standard VAT rate in Nigeria is currently 7.5%. The Federal Inland Revenue Service (FIRS) is responsible for collecting VAT revenue in Nigeria. This revenue is then shared among the different tiers of government according to a predetermined formula.