The total taxes on products in the Nigerian economy have increased by 112.02% from N1.43 trillion in 2019 to N3.03 trillion in 2022.
This rise also coincides with a hike in the Value Added Tax (VAT) from 5% in 2020 to 7.5% in 2022.
This is according to the National Bureau of Statistics’ ‘Nigerian Gross Domestic Product Report (Expenditure and Income Approach),’
Net taxes on products, defined as the total taxes payable on products minus any subsidies received, amounted to N1.43 trillion in 2019.
In 2020, with the introduction of the new VAT regime, taxes increased by 34.97% to reach N1.93 trillion. This figure further rose by 32.13% to N2.55 trillion in 2021 and by 18.88% to N3.03 trillion in 2022.
The NBS commented on the growth of net taxes on products, stating that on a year-on-year basis, there was a real-term growth of 10.30% in Q3 of 2022 and 11.18% in Q4 of 2022, compared to 6.22% and 67.99% in Q3 and Q4 of 2021, respectively.
On an annual basis, net taxes on products grew by 14.19% in 2022, which was lower than the growth rate of 25.81% recorded in 2021. In nominal terms, the growth rate of net taxes on products was 24.95% in Q3 of 2022 and 23.71% in Q4 of 2022.
The slower growth in taxes in 2022 can be attributed to rising inflation and challenging economic conditions that impact purchasing power in the country. The NBS noted that growth rates turned negative in Q2 to Q4 of 2022 due to increasing prices and difficult economic conditions.
Specifically, the growth rates were -5.83% in the third quarter and -12.47% in the fourth quarter of 2022, indicating lower rates compared to the corresponding quarters of 2021.
Since the implementation of the 7.5% VAT rate in February 2020, VAT revenues have increased by 108.33% from N1.2 trillion in 2019 to N2.5 trillion in 2022. Despite the rise in VAT revenues, there is a new call for further increasing the country’s VAT rate.
Former Minister of Finance, Zainab Ahmed, suggested raising the VAT rate from 7.5% to 10%, stating that Nigeria currently has the lowest VAT rate in the world.
Ahmed emphasized the importance of VAT in revenue generation and mentioned that tax compliance has increased.
The adjustment from 5% to 7.5% was made to boost revenue, although the original target was 10%. The aim is to reach 10% in the second year to further enhance revenue
