The federal government has outlined its revenue projection for the year 2024, aiming to generate approximately N593.1 billion from Value Added Tax (VAT) collection. This information is detailed in the revenue projection section of the 2024 appropriation bill submitted to the Senate.
The overall revenue target for the federal government in 2024 is set at N12.7 trillion, with the main pool of federation revenue accounting for N12.1 trillion and the targeted revenue from VAT standing at N593.1 billion.
VAT is a consumption tax imposed on goods and services purchased. The federal government increased the VAT rate from 5% to 7.5% in February 2020, contributing to recent growth in VAT revenue.
In 2022, Nigeria generated N2.51 trillion from VAT, marking a 21.2% increase from the N2.17 trillion generated in 2021. The federal government earned N375 billion, representing the statutory 15% share earmarked for the federal government from VAT collection.
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The adjustment in the VAT rate from 5% to 7.5% in 2020 has played a significant role in doubling Nigeria’s VAT collection, reaching a record high of N2.51 trillion in 2022.
In the first half of 2023, Nigeria collected around N1.49 trillion from Value Added Tax, according to data from the National Bureau of Statistics (NBS). The second half of 2023 witnessed a 10% increase in VAT collection compared to the previous quarter.
Nigeria has been actively working to boost revenue collection in the non-oil sector, aiming to fund capital projects and reduce dependence on debt. The current tax-to-GDP ratio in the country is at 10.8%, falling significantly below its counterparts in Sub-Saharan Africa and the World Bank’s recommended average of 18%.
In response to this, the administration of President Bola Tinubu has established the Presidential Committee on Fiscal Policy and Tax Reforms. The committee is tasked with addressing bottlenecks in the nation’s tax policy to enhance the tax-to-GDP ratio.