President Bola Ahmed Tinubu has announced the removal of Value Added Tax (VAT) on critical goods and services including food, healthcare, education, rent, public transportation and renewable energy.
The decision forms part of the administration’s pro-poor tax reform agenda aimed at reducing the financial burden on low-income households and enhancing disposable income across vulnerable population groups.
The announcement was made during the president’s second-year anniversary address on Thursday, where he outlined significant fiscal and structural adjustments implemented since assuming office in May 2023.
“Essential goods and services such as food, education, and healthcare will now attract 0% VAT. Rent, public transportation, and renewable energy will be fully exempted from VAT to reduce household costs further,” President Tinubu stated.
The new VAT framework is a core component of the administration’s broader strategy to establish a more equitable tax system that incentivises growth while shielding the poor from excessive tax pressure.
According to Tinubu, the VAT exemptions were informed by recommendations from the Presidential Fiscal Policy and Tax Reforms Committee led by Taiwo Oyedele, which was mandated to realign the country’s tax architecture with global best practices and local economic realities.
The government noted that the reforms were designed not only to enhance tax efficiency but to accelerate economic formalisation by encouraging small and medium-sized enterprises (SMEs) to participate in the tax system under simplified conditions.
Tinubu emphasized that the new measures are tailored to promote economic inclusion, enable consumer spending, and foster human capital development.
“Our goal is not just to raise revenue but to ensure that the tax system supports economic growth and helps improve the standard of living for ordinary Nigerians,” he said.
The administration also introduced initiatives to eliminate multiple taxation at all levels of government, a move seen as critical to boosting investor confidence and business expansion.
By simplifying the tax code and curbing the proliferation of overlapping levies, the federal government aims to lower entry barriers for businesses and enhance Nigeria’s competitiveness in regional markets.
In parallel with the VAT reform, the Tinubu administration disclosed that Nigeria’s tax-to-GDP ratio rose from 10 percent to over 13.5 percent in 2024 — a significant improvement attributed to enhanced revenue administration and improved compliance mechanisms.
“This was not by accident,” Tinubu explained. “It results from deliberate improvements in our tax administration and policies designed to make our tax system fairer, more efficient, and more growth-oriented.”
Economic analysts have welcomed the exemptions as a pragmatic step toward balancing revenue mobilisation with social protection, noting that shielding food, housing, and healthcare from VAT will provide immediate relief to households grappling with inflation and declining purchasing power.
The Nigerian Bureau of Statistics reported headline inflation at 33.69% as of April 2024, with food inflation rising above 40%. By removing VAT on basic needs, the government hopes to limit price escalation and ease pressure on consumption.
The reforms also align with the broader macroeconomic strategy that includes the removal of petrol subsidies, exchange rate liberalisation, and foreign reserves accretion, which the government says has grown from $4 billion in 2023 to over $23 billion by end of 2024.
Tinubu reiterated that his administration remains committed to responsible fiscal governance, inclusive growth, and sustainable development.
“These reforms are laying a solid foundation for long-term prosperity. We are positioning Nigeria to attract investment, create jobs, and lift more citizens out of poverty,” he added.
The fiscal agenda is expected to continue into 2025, with the government targeting further streamlining of the tax framework, boosting state-level revenue generation, and improving transparency in public finance management.
