The Federal Government of Nigeria has generated a revenue of N424.71bn billion from Value Added Tax (VAT) in the third quarter of 2020. This is the highest it has ever generated in a single quarter.
According to the Sectoral distribution of VAT Report for Q3 2020 released by the National Bureau of Statistics (NBS), the total sum collected during the quarter grew by a whopping 29.8% from the N327.20bn generated in the previous quarter.
Similarly, the sum generated also reflected a significant year on year growth as the amount grew 54.37% from the N275.12bn generated in the corresponding quarter of 2019.
Pandemic Recovery Boosts VAT
The huge growth recorded in VAT revenue was driven mainly by the gradual recovery of the major revenue-generating sectors from the effects of the pandemic.
For example, the hotels and catering sector which was severely diminished by the lockdown during the second quarter Q2 rose to N2.14 billion from N1.36 billion. Similarly, tax contributed by Banks and Financial Institutions rose from 5.11 billion to N6.87 billion in Q3.
Apart from the pandemic, the effects of the increase of VAT rate from 5% to 7.5 % was also reflected in the quarter as growth rates doubled in some sectors.
The Value Added Tax contributed by Offshore Operations saw a 193.2% increase from N483.7 million to N1.41 billion during the quarter. Also, Chemicals, Paints and Allied Industries sector saw a growth of 111.1% to N1.77 billion.
Manufacturing Generates Highest Revenue
Manufacturing generated the highest revenue with N47.07bn generated during the quarter. It was closely followed by Professional Services which generated N44.01bn, and Commercial and Trading generating N21.18bn.
The Oil sector and Oil related sectors generated value added tax of N14.5 billion in Q3
Mining generated the least and closely followed by Textile and Garment Industry and Pharmaceutical, Soaps & Toiletries with N64.5 million, N346.27 million and N386.16 million respectively.
Out of the total amount generated in the quarter, N214.66bn was generated as Non-Import VAT for local while N115.34bn was generated as Non-Import VAT for foreign. The balance of N94.70bn was generated as NCS-Import VAT
In summary, the growth of VAT revenue during the quarter shows that most sectors are recovering gradually from the pandemic. Few sectors like mining showed a notable decline but the drop appear unique to the individual sector.
In general, the current growth rate shows that government revenue through VAT in coming quarters could significantly increase as the economy continues to recover.
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