Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, on Monday, debunked reports doing the rounds that the rate for Value-Added Tax (VAT) has been upwardly adjusted to 10% from 7.5%.

The Minister, in a statement signed by him, affirmed that VAT rate as contained in relevant tax laws and chargeable on goods and services remains 7.5%.

“The current VAT rate is 7.5% and this is what government is charging on a spectrum of goods and services to which the tax is applicable. Therefore, neither the Federal Government nor any of its agencies will act contrary to what our laws stipulate.

“The tax system stands on a tripod, namely tax policy, tax laws and tax administration. All the three must combine well to give us a sound system that gives vitality to the fiscal position of government.

“Our focus as a government is to use fiscal policy in a manner that promotes and enhances strong and sustainable economic growth, reduces poverty as well as makes businesses to flourish.

“The imputation in some media reports on the issue of VAT and the opinion articles that have sprouted from them seem to wrongly convey the impression that government is out to make life difficult for Nigerians. That is not correct. If anything, the Federal Government has, through its policies, demonstrated that it is committed to creating a congenial environment for businesses to thrive.

“In fact, it is on record that the Federal Government, as part of efforts to bring relief to Nigerians and businesses, recently ordered the stoppage of import duties, tariffs and taxes on rice, wheat, beans and other food items.

“For emphasis, as of today, VAT remains 7.5% and that is what will be charged on all the goods and services that are VAT-able,” Edun said

Taiwo Oyedele, Chairman Presidential Fiscal Policy and Tax Reforms Committee, has said the committee working on increasing the Valued Added Tax (VAT) from the current 7.5% to 10%.

Oyedele announced this during an interview on Channels TV’s Politics Today.

According to Oyedele, the tax law the committee drafted would be submitted to the National Assembly for approval.

He also said his committee was working to consolidate multiple taxes in Nigeria to ensure tax reduction.

He said, “We have significant issues in our tax revenue. We have issues of revenue generally which means tax and non-tax. You can describe the whole fiscal system in a state that is in crisis.

“When my committee was set up, we had three broad mandates. The first one was to look at governance: our finances as a country, borrowing, coordination within the federal government and across sub-national.

“The second one was revenue transformation. The revenue profile of the country is abysmally low. If you dedicate our whole revenue to fixing roads it will be insufficient. The third is on government assets.

“The law we are proposing to the National Assembly has the rate of 7.5% moving to 10% from 2025. We don’t know how soon they will be able to pass the law. Then subsequent increases are also indicated in terms of the year they will kick in.

“While we are doing that, we have a corresponding reduction in personal income tax. Anybody that is earning about N1.5 million a month or less, they will see their personal income tax come down. Companies will have income tax rate come down by 30% over the next two years to 25%. That is a significant reduction.

“Other taxes they pay are quite many: IT levy, education tax, etc. All these we are consolidating into a single one. They will pay 4% initially. That will go down to 2& in the next few years.”

The Nigerian economy grew in the second quarter of 2024 by 3.19% year-on-year, according to data released by the National Bureau of Statistics (NBS) on Monday.

This is an improvement from the 2.98% growth recorded in the first quarter of 2024 and the 2.51% achieved during the same period in 2023.

The growth was driven predominantly by the service sector, which saw a 3.79% growth during the quarter and contributed 58.76% to Nigeria’s aggregate GDP.

The service sector, which includes industries such as telecommunications, banking, and hospitality, has become a significant driver of economic activity in Africa’s largest economy as it diversifies away from its traditional reliance on oil and agriculture.

In addition to the strength of the service sector, the industry sector also posted a positive performance, growing by 3.53% during the quarter.

This is a notable recovery from the -1.94% decline recorded in the same period in 2023.

The industry sector includes manufacturing, construction, and utilities, which have benefitted from increased investments and improvements in energy supply.

The agriculture sector, a longstanding pillar of the Nigerian economy, experienced a modest growth of 1.41%, slightly lower than the 1.50% recorded in the second quarter of 2023.

Despite the slower growth, agriculture remains vital to Nigeria’s economy, providing employment to millions of Nigerians and contributing to food security.

The overall 3.19% growth in GDP highlights the resilience of the Nigerian economy despite ongoing challenges such as inflation, currency depreciation, and insecurity.

Analysts had predicted a modest growth rate of around 3.16% for the second quarter, closely aligning with the actual performance.

The Financial Derivatives Company (FDC) also forecasted Nigeria’s annual average GDP growth to reach approximately 3.07% in 2024, which is consistent with the International Monetary Fund’s (IMF) revised projections.

The Q2 GDP performance supports these forecasts, providing cautious optimism for the remainder of the year.

While the growth of the Nigerian economy is a positive development, challenges remain. Inflation, particularly in food prices, continues to strain household incomes, and the naira’s depreciation has increased the cost of imports.

Also, infrastructure deficits and insecurity in various regions of the country pose obstacles to sustained economic expansion.

Despite these challenges, the continued growth in the service and industry sectors demonstrates Nigeria’s capacity to adapt and evolve in an increasingly diversified economy. If these sectors maintain their current trajectory, they could help mitigate some of the pressures facing the economy and improve living standards for Nigerians.

The government’s focus on economic reforms, including efforts to attract foreign investment, improve infrastructure, and enhance security, will be crucial in sustaining and building on the positive GDP growth in the coming quarters.

Economic diversification remains a key goal, and the strong performance of the service sector is a promising sign that Nigeria is moving in the right direction.

With cautious optimism, experts are hopeful that Nigeria can leverage its expanding sectors to achieve sustained economic growth and create more opportunities for its growing population.