In a bid to increase government revenues, the Federal Executive Council has approved plans to increase Value Added Tax (VAT) from 5% to 7.2%. This represents a 44% increase. VAT has remained at 5% since January 1, 1994, when it became active .
This was made public in a series of tweets by Tolu Ogunlesi, the President’s Special Assistant on Digital and New Media.
According to Tolu, this was one of the decisions taken at the Federal Executive Council meeting held on Wednesday at the Presidential Villa Abuja. Nigeria collected about N1 trillion in VAT in 2018. A 44% increases could generate over N400 billion in additional revenue for the government if everything remains constant.
Nigeria is widely believed to be facing a revenue crisis following the drop in oil prices in 2014. Since the Buhari administration assumed power in 2015, government revenue has failed to hit the heights of the immediate past administration which was over N12 trillion.
In 2018 total revenue accruing to the Federation Account was about N7.1 trillion compared to budget of N10.4 trillion. It was worse in 2017 at about N4.9 trillion. VAT revenues are also a significant portion of government revenues. In 2018, total VAT revenue accruing to the Federation account was N1.04 trillion or 14% of revenues.