On Tuesday, the Federal Government expressed its concern regarding the inadequate performance of Nigeria’s Value Added Tax (VAT), which is the lowest among countries in the West African region. This development has raised alarm within the government, emphasizing the urgency for policy changes, as the current VAT rate contributes less than one percent to the country’s Gross Domestic Product (GDP).
During the inaugural session of a three-day workshop focused on aligning Nigeria’s VAT Act with ECOWAS directives, Basheer Abdulkadir, the Director of Tax Policy at the Federal Ministry of Finance, Budget, and National Planning, highlighted the issue. The workshop was organized by the ECOWAS Commission as part of the Support Programme for Tax Transition in West Africa (PATF), aimed at enhancing domestic taxation management and promoting better coordination within the ECOWAS and West African Economic and Monetary Union regions.
Abdulkadir observed a misalignment between Nigeria’s VAT exemptions and those of ECOWAS, emphasizing the need for specific products, goods, and services to be exempted from VAT to benefit impoverished households. He stated, “Our VAT performance and rate remain distressingly low. Nigeria’s VAT contributes less than one percent to the GDP, which is concerning. Furthermore, compared to the sub-region’s average VAT rate of 16 percent, Nigeria’s rate stands at 7.5 percent, the lowest. Hence, we must undertake significant policy changes in tax administration and develop strategies to tackle these issues.”
Abdulkadir also noted the disparity in VAT exemptions between Nigeria and ECOWAS and acknowledged that these differences impact revenue mobilization under the VAT system. He stressed the necessity of aligning Nigeria’s exemptions with the directives of ECOWAS to address this matter effectively.
