N1.78 Trillion in Q3 2024: Nigeria’s VAT Collection – What’s Behind the Shocking Surge?

Nigeria’s Value Added Tax (VAT) revenue achieves record growth in Q3 2024, with manufacturing and information sectors leading contributions.

The National Bureau of Statistics (NBS) has announced an impressive growth in Nigeria’s Value Added Tax (VAT) collection, which reached a record N1.78 trillion in the third quarter of 2024. This marks a 14.16% quarter-on-quarter increase from N1.56 trillion in Q2 2024 and a staggering 88% year-on-year growth compared to Q3 2023.

VAT Revenue Breakdown

The Q3 Value Added Tax collection highlights significant contributions from three key streams:

• Local VAT Payments: N922.87 billion
• Foreign VAT Payments: N448.85 billion
• Import VAT: N410.62 billion

Local Value Added Tax payments formed the largest segment, underscoring robust domestic economic activity and enhanced compliance measures

The human health and social work activities sector led the growth, recording an unprecedented 250.39% increase. It was followed by the households as employers sector, which grew by 102.09%.

However, some sectors faced declines. The water supply, sewerage, waste management, and remediation activities sector contracted sharply by 41.92%, while the activities of extraterritorial organizations and bodies fell by 36.14%.

Leading Contributors

The top-performing sectors in terms of contributions to the Value Added Tax pool were:

• Manufacturing: 22.21%
• Information and Communication: 20.89%
• Mining and Quarrying: 18.90%

In contrast, activities of households as employers and water supply services contributed just 0.01% and 0.03%, respectively.

Ongoing Tax Reform Discussions

A proposed revenue-sharing formula under new tax bills aims to adjust Value Added Tax allocation between the federal and sub-national entities by adopting a derivation principle. Currently, Value Added Tax revenue is distributed as follows:

• 15% to the Federal Government
• 50% to States and the Federal Capital Territory (FCT)
• 35% to Local Governments

However, these changes face opposition from governors of Northern states and traditional rulers, who argue that the reforms may disadvantage their regions.