The Value Added Tax (VAT) generated from Nigeria’s construction and real estate sector rose by 124% to N22.45 billion in 2022, up from N10 billion realised in 2018, the National Bureau of Statistics (NBS) has reported.
The NBS report showed that the sector realised a total of N70 billion during the same period.
VAT, a consumption tax levied on goods and services, is paid by consumers at a rate of 7.5%. It plays a vital role in generating revenue for the Nigerian government, which is subsequently disbursed to the three tiers of government through the Federation Accounts Allocation Committee.
Examining 17 documents obtained from the National Bureau of Statistics, it was found that the VAT revenue generated from the construction and real estate sector was N10 billion in 2018, slightly increased to N10.17 billion in 2019.
However, the figures witnessed a significant upturn in subsequent years, reaching N11.38 billion in 2020, N15.89 billion in 2021, and ultimately culminating in the unprecedented N22.45 billion in 2022.
This impressive growth in VAT revenue can be attributed, in part, to the hike in the VAT rate from 5% to 7.5% in 2020. Since then, Nigeria has doubled its VAT collection with a record-breaking amount of N2.51 trillion recorded in 2022.
While the increase in VAT revenue reflects positively on the nation’s financial landscape, it has also prompted discussions on potential further adjustments to the VAT rate.
Zainab Ahmed, the former Minister of Finance, has advocated for an increase in the VAT rate from 7.5% to 10% under the incoming government.
However, industry experts have urged caution in implementing such changes. Muda Yusuf, the Director of the Centre for the Promotion of Private Enterprise, has called for a thorough review of VAT, considering the existing challenges faced by businesses.
Yusuf emphasized the importance of expanding the tax net rather than burdening those already within it.
Echoing similar sentiments, Johnson Chukwu, the Chief Executive Officer of Cowry Assets, explained that an effective tax system should prioritize ease of collection, low cost, and convenient payment methods.
As Nigeria’s construction and real estate sector continues to contribute significantly to VAT revenue, striking a delicate balance between revenue growth and supporting businesses’ sustainability remains crucial.
The nation’s future fiscal policies must carefully consider the interests of both the government and the private sector to ensure a sustainable and thriving economy.
