The latest report on Value Added Tax (VAT) from the NBS reveals that the federation’s gross VAT collections for Q2 ’23 experienced significant growth, increasing by 10% quarter-on-quarter and an impressive 30% year-on-year, reaching NGN 781 billion. This robust performance in Q2 implies a total gross VAT collection of nearly NGN 1.5 trillion in the first half of 2023, marking a substantial 25% year-on-year increase.Thank you for reading this post, don't forget to subscribe!
During Q2 ’23, domestic (non-import) VAT took the lead as the largest source of VAT revenue, accounting for NGN 512 billion, which represents 66% of the total receipts. Notably, this figure marked a substantial 43% year-on-year increase. Foreign (non-import) VAT and import VAT contributed the remaining NGN 143 billion and NGN 127 billion, respectively.
The manufacturing sector continued to lead with a total VAT contribution of NGN 152 billion, representing 30% of domestic VAT collection and 19% of total VAT receipts. VAT receipts from this sector showed strong growth, increasing by 17% quarter-on-quarter and 28% year-on-year.
Despite the increased VAT collection, the sector recorded modest GDP growth of 2.2% in Q2 ’23. Over the past eight quarters, the sector’s GDP growth has averaged just 2.5%, influenced by factors like weak consumer demand and macroeconomic challenges such as the foreign exchange liquidity crunch and high inflation.
The Information and Communication Technology (ICT) sector emerged as the second-largest contributor to VAT revenue, generating over NGN 108 billion, accounting for 14% of total VAT collections. Although ICT GDP growth slowed in Q2 ’23, it still posted a respectable 8.6% growth compared to 10.3% in Q1 ’23.
Financial and insurance services also made a significant VAT contribution, totaling around NGN 57 billion. This represents an 11% share of domestic VAT collections and a 7% share of gross VAT receipts.
The Mining and Quarrying sector, along with Public Administration, rounded out the top five contributors to VAT revenue. Both sectors contributed NGN 54 billion and NGN 38 billion, respectively, accounting for 11% and 7% of domestic VAT revenue and 7% and 5% of total VAT revenue, respectively.
Despite the positive VAT outcomes, economic activity across most sectors remains subdued. While efforts to improve collection efficiency are commendable, it is essential for the government to intensify efforts to create a conducive macroeconomic environment that enables businesses to thrive.