As the Federal Government (FG) continues to intensify efforts to drive revenue, the latest report released by the National Bureau of Statistics disclosed that Nigeria generated a total sum of N876.09 billion as Value Added Tax (VAT) in 9 months.
According to the latest report released by the NBS, VAT generated in 9 months (January – September) 2019 rose by 8.1% when compared to the corresponding period of 2018. Specifically, a cumulative N876.09 billion was generated, from N810.03 billion generated within the same period in 2018.
Manufacturing sector continues to top chart
The breakdown of the VAT report shows that Nigeria’s manufacturing sector remains the biggest source of VAT collection in Nigeria. Within the period under review, Manufacturing Sectors generated a total of N96.12 billion, followed by professional services (N85.98 billion) and commercial and trading (N45.66 billion).
Other sectors that make up Nigeria’s top 10 biggest VAT sources during the period include Breweries, Bottling and Beverages (N31.8 billion), State Ministries and Parastatals (N29.24 billion), Oil Producing (N27.64 billion), Federal Ministries and Parastatals (N25.08 billion), Transport and Haulage Services (N17.63 billion), Banks and Financial Institutions (N12.68 billion) and the last item not defined generated a total of N11.05 billion.
VAT rose by 45.9% in 4 years, but not enough
Analysis of VAT trend in Nigeria shows in the last four years, VAT rose by 45%, amounting to N348.60 billion. According to the NBS data, VAT trend shows that in 2015 (full year), Nigeria generated N759.4 billion. Fast forward to 2018, total VAT generated rose to N1.108 trillion.
Meanwhile, despite the increase in VAT revenue in the last 4 years, the percentage of year-on-year change has been on the decrease. For instance, between 2017 and 2018, VAT generated by Nigeria rose only by 14%, from 25% in the previous year. This means the 2018 fiscal year suffered a major setback in terms of revenue generation.
Considering the cumulative N876 billion generated so far in 2019, the Federal Inland Revenue Service requires a really big push in VAT generation to surpass the amount generated in the previous year.
Nairametrics had earlier reported that the estimated federally collected revenue of N894.09 billion fell short of the monthly budget estimate of N1.2 trillion. The shortage of N351.98 billion represents a 28.2% shortfall in October 2019.
FG’s revenue drive may affect key sectors
The Federal Government of Nigeria has not hidden its agenda to drive in more revenue from the fiscal side of the economy, as several policies have been introduced in recent times. Some of the policies introduced by the government include increasing target for revenue-generating agencies, raising VAT by 50%, and reviews of various tax laws which are all included in the proposed 2019 finance bill.
Meanwhile, concerns have been raised that the big push and desperate attempt of the government to raise revenue generation at all cost poses huge threats to key sectors of the Nigerian economy.
In a recent report on Nairametrics, multinational professional services firm, KPMG, disclosed that the Nigerian economy might be seriously hit through the ambitious revenue drive of the Federal Government.
“The 2020 budget revenues targets are ambitious, and this made the Federal Government push strongly for revenues across all fronts through the introduction of the 2019 Finance Bill.
“Also, the increase of VAT by 50% by the Federal Government might potentially affect sales negatively in major sectors of the Nigerian economy, as consumers are highly sensitive to price changes.”
As the manufacturing sector remains the biggest source of VAT generation, it suggests FG’s revenue drive may deal a big blow to stakeholders in the manufacturing sector as sales may be on the low due to consumers’ expectations.