Macroeconomic Report & Economic Updates

Nigeria Economic Update (Issue 48)

The federal government has finally approved the proposed increase of Value Added Tax (VAT), from the current 5% to 7.5%1. The increment was passed in the recent 2019 financial bill and included exemptions for food items (agro- and aqua-based stable foods) as well as services rendered by microfinance banks. The bill included a new VAT Company Compliance threshold, exempting  companies with an annual turnover of N25 million or less from filling obligations2. However, the current rate is marginal when compared to the VAT rate in other lower middle-income African countries like Cote d’Ivoire, Senegal and Lesotho with VAT rates of 20%, 18% and 15% respectively. Given that VAT is a consumption tax placed on goods and services, the increase stands to weigh heavily on Nigerians. The negative effect on Nigerian consumers becomes particularly more apparent considering that the government intends to reintroduce tolls to federal roads; imposes steep fines on companies such as MTN, Stanbic IBTC bank (whose customers will bear the brunt); and has recently proposed a 5% online VAT purchase tax. While raising public revenue is critical, it is imperative that the welfare of Nigerians is not negatively affected. Alternatively, other financing options can be explored such as the use of diaspora bonds and remittances.

Download Label
March 13, 2018 - 4:00 am
348.46 kB
v.1.7 (stable)