Daily Insight: Can VAT Cross N1.0tn By Year-End?

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Recently, the NBS published data on the sectoral breakdown of Value Added Taxes (VAT) for Q1-2018. As it is generally known, VAT is charged across the supply chain from production to sales. A total of N269.7bn was recouped as VAT in Q1-18, a 6.2% q/q improvement to the N254.1bn generated in Q4 2017 or 6.2% y/y increase compared to N221.4bn generated in Q1-2017. Of the total VAT, non-import local VAT accounted for 45.0% (N121.4bn), nonimport foreign VAT was 36.5% (N98.4bn) while Nigerian Customs Service Import VAT represented 18.5% (N49.9bn).

Non-import VAT is largely driven by Other Manufacturing Sector, accounting for N30.1bn (24.8%) of the total, followed by professional services, commercial trading, state ministries & parastatals, breweries, oil producing, banks and other financial institutions which together accounted for N64.9bn (53.5%) of the non-import VAT. The mining, pharmaceuticals, textiles, publishing and printing, and agriculture &plantations all contributed a meager N1.3bn (1.1%) of the total non-import VAT remitted in Q1-18.

While the parse contribution of mining and textiles to VAT is not surprising, it is quite alarming that the Agriculture sector, which accounts for up to 21.7% of
the nation’s GDP ranks among the 5 lowest sources of the VAT. This could be attributed to the dominance of subsistence activities in the sector. However, VAT has
sustained an uptrend since 2015 despite a slowdown in the broader economy, hence, the possibility of recouping an annualized total of N1.1tn (c.21% of budgeted revenue) by year-end.

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