CBN Says Nigeria earned N1.13trn from VAT former 5% rate IN 2019

0
410

Nigeria earned N1.128 trillion from its now former five per cent Value Added Tax (VAT) rate in 2019, the Central Bank of Nigeria (CBN) has said.

The figure represents an increase of N6.70 billion compared with the N1.122 trillion earned by the country in the previous year.

According to analysis of the economic report quoted for Q4, 2019 recently released by the CBN, indicates that VAT proceeds amounting to N289.55 billion and N283.67 billion went into the nation’s VAT pool account in Q1 2019 and Q2’ 19 respectively. Also, VAT proceeds amounting to N279.24 billion and N276.43 billion, entered the same account in Q3 and Q4’ 19 respectively.

Statutorily, all proceeds of VAT flow into the VAT pool account which are distributed monthly to the federal, states (including Federal Capital Territory) and local governments in the proportion of 15 per cent, 50 per cent and 35 per cent respectively (with consideration for derivation   principle).

For instance, a breakdown of the CBN report shows that in Q4’ 19, the Federal Government received N41.46 billion from the VAT pool account while the states and local governments received a total of N138.22 billion and N96.75 billion respectively.

As the apex bank put it: “Non-oil revenue (gross) at N1,038.65 billion fell below the quarterly budget of N1,341.72 billion by 22.6 per cent. It also fell below the level in the preceding quarter by 33.9 per cent. The drop in non-oil revenue relative to the quarterly budget was due to the decline in receipt from all its components except customs and excise duties.

 

“After the statutory deductions and transfers of N517.67 billion and N450.46 billion, respectively, a net sum of N1,634.17 billion was retained in the Federation Account for distribution. Of this amount, the Federal Government received N786.35 billion, state and local governments received N398.85 billion and N307.49 billion, respectively, while the balance of N141.47 billion was transferred to the 13.0% Derivation Fund for distribution among the oil-producing states.

“In addition, the Federal Government received N41.46 billion, while the state and local governments received N138.22 billion and N96.75 billion, respectively, from the VAT Pool Account.

Similarly, the regulator’s Q3’ 19 economic report shows that the Federal Government got N41.89 billion from the VAT pool account while the states and local governments received N139.62 billion and N97.73 billion respectively.

In fact, the Federal Government has argued that its decision to increase the VAT rate from five per cent to 7.5 per cent from February 1st (last Saturday) was aimed at helping the states to pay the N30,000 minimum wage.

Senate Committee Chairman on Finance, Solomon Adeola, told journalists at the weekend that with the 7.5 per cent VAT rate as contained in the new Finance Act, no state of the federation should claim that it’s unable to pay the minimum wage.

However, concerns have been raised in some quarters that the increase in VAT might significantly impact sales in key sectors of the Nigerian economy.

Specifically, in a recent report, multinational professional services firm, KPMG, stated that: “The increase of VAT by 50% by the Federal Government might potentially affect sales negatively in major sectors of the Nigerian economy, as consumers are highly sensitive to price changes.”

The firm pointed out that since the manufacturing sector remains the biggest source of VAT generation, the increase in the VAT rate will lead to higher prices thereby hurting sales.

According to the National Bureau of Statistic (NBS), of the cumulative N876.09 billion VAT generated in the first nine months of last year, the manufacturing sector generated a total of N96.12 billion, followed by professional services (N85.98 billion) and commercial and trading (N45.66 billion).

Other sectors that made up Nigeria’s top 10 biggest VAT sources during the period included Breweries, Bottling and Beverages (N31.8 billion), State Ministries and Parastatals (N29.24 billion), Oil Producing (N27.64 billion), Federal Ministries and Parastatals (N25.08 billion), Transport and Haulage Services (N17.63 billion), Banks and Financial Institutions (N12.68 billion) and others,  N11.05 billion.