The Federal Government is preparing to gradually increase the Value Added Tax (VAT) rate from 7.5% to 15%, aiming to improve domestic revenue collection and bolster public finances.
According to a document from the Ministry of Finance, the government plans to address its revenue challenges by expanding the tax base and tightening compliance, particularly with corporate income taxes. The document notes, “The VAT rate will be progressively raised from 7.5% to 15% as part of broader measures to enhance domestic revenue mobilization.”
Currently, Nigeria’s tax-to-GDP ratio is just 10%, one of the lowest in Sub-Saharan Africa. The government aims to raise this figure to 18%, closer to the regional average. The proposed VAT increase would double the existing rate, which was last adjusted in 2020.
Since taking office, President Bola Tinubu has prioritized fiscal reforms. His administration has established a committee tasked with overhauling tax legislation and administration. The committee has already introduced policies such as a new withholding tax system that exempts small businesses and reduces tax rates for low-margin enterprises.
While recent rumors of an imminent VAT increase to 10% were denied by Finance Minister Wale Edun, the World Bank has encouraged Nigeria to raise VAT as part of a broader effort to diversify revenue sources and strengthen fiscal sustainability. The global institution recommended the increase as a way to enhance non-oil revenue streams and improve the country’s overall financial outlook.
