Analysts have commended the Federal Inland Revenue Service for collecting N1.56 trillion in Value Added Tax during the second quarter of this year.

This was a 9.11% increase from the N1.43tn reported in the first quarter of the year, according to a report released by the Nigeria Bureau of Statistics on Sunday.

It showed that during the period under review, local VAT payments contributed N792.58 billion, overseas VAT payments accounted for N395.74 billion, and VAT on imports was N372.95 billion.

Value Added Tax for Q2 2024 was reported to have totalled N1.56 trillion, representing a growth rate of 9.11% on a quarter-over-quarter basis from N1.43 trillion in Q1 2024. In Q2 2024, local payments were reported at N792.58 billion, foreign VAT payments at N395.74 billion, and import VAT at N372.95 billion, according to the report.

Vincent Nwani, Head of Research at FMDQ Group Plc, commended the FIRS’s capacity to increase VAT income in his remarks regarding the growth in VAT.

But he expressed concern that the nation was still trailing behind the rest of the world in terms of VAT income.

More tax money has been brought in by the federal government. It is admirable that the government enhanced tax collecting. It won’t, however, enhance Nigeria’s foreign trade. Additionally, it won’t address the minimum wage or our demand for infrastructure, according to Nwani.

Additionally, Vice Chairman of Highcap Securities Ltd. David Adonri stated in an interview with The PUNCH that the Federal Government’s ability to increase revenue was a positive development.

On the other hand, he argued that the country’s reliance on imported commodities was highlighted by the rise in import VAT, which might have contradictory repercussions on the domestic economy.

Adonri claims that while more VAT collection would help the government’s budget, it might also increase inflation and lower the purchasing power of consumers.

Manufacturers won’t be impacted, but there may be a rise in domestic raw material costs and logistics due to bandits and law enforcement stealing supplies. The effort required to obtain these commodities has also increased.

“But it’s important to clarify that the VAT has always existed and won’t have an impact on manufacturing companies,” he said.

Dr. Segun Ogundare, an economist at Ajayi Crowther University in Oyo, said that while the rise in VAT revenues suggested a rise in economic activity, it might have a negative impact on consumer purchasing.

Higher VAT rates, he continued, may put a pressure on household budgets, which would reduce consumer demand and possibly slow down economic growth.

Prices for products and services usually rise in response to a rise in VAT, which can raise living expenses and decrease discretionary spending. Customers may become resistant to this and reduce their buying of non-essential items.

“Since rising VAT revenues frequently coincide with rises in commodity prices, they should not be regarded at face value. Increased taxes may put a pressure on consumer budgets, resulting in lower spending and maybe causing businesses to close or lower their pricing, the speaker warned.

When it comes to sectoral performance, the activities related to human health and social work had the highest growth rate (98.44%), followed by those related to agriculture, forestry, and fishing (70.26%), and water supply, sewerage, waste management, and remediation (59.75%).

Conversely, with a growth rate of -46.84 percent, household employment activities and undifferentiated goods- and services-producing activities for household consumption showed the sharpest fall.

At -42.59 percent, real estate activities also experienced a notable downturn.

With an 11.78% sectoral contribution, manufacturing led the way, followed by information and communication at 9.02%, mining and quarrying at 8.79%, and manufacturing at 11.78%.

However, with a growth rate of -46.84 percent, household employment activities and undifferentiated goods and service production for personal use had the lowest growth rate, followed by real estate activities at -42.59 percent. The top three largest shares in terms of sectoral contributions in Q2 2024 were

Activities of extraterritorial groups and entities contributed 0.01%, whilst household activities as employers had the lowest contribution, at 0%.

The contributions from real estate services, waste management, sewage, water supply, and cleanup operations totalled 0.04 percent.

In comparison to the N780.49bn collected in the second quarter of 2023, VAT collections in Q2 2024 increased by 99.82 percent year over year.

According to The PUNCH, Atiku Abubakar, the former vice president, had criticised the Federal Government’s intentions to raise the Value Added Tax.

According to Atiku, the plan would aggravate Nigeria’s already precarious economic growth and deepen the country’s cost of living crisis.

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