However, a decision has yet to be taken on the effective date of the new rate.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, who spoke with State House Correspondents after the FEC meeting in Abuja, said consultations were in process over when the new rate would apply.
She explained that stakeholders, including the National Assembly and the states, would have to agree on the date.
The minister stated that the VAT Act would also have to be amended by the National Assembly before the commencement of the new rate, which she said could be sometime in 2020.
She said, “We also reported to council and council has agreed that we start the process towards the increase of the VAT rate.
“We are proposing and council has agreed to increase in the VAT rate from five per cent to 7.2 per cent.
“This is important because the Federal Government only retains 15 per cent of the VAT; 85 per cent is actually for the states and local governments.
“The states need additional revenue to be able to meet the obligations of the minimum wage.”
She added, “This process involves extensive consultations that need to be made across the country at various levels and also it will involve the review of the VAT Act.
“So, it is not going to be implemented immediately until the Act is reviewed.”
Ahmed, who also spoke on preparations for the 2020 budget, disclosed that FEC approved the 2020-2022 Medium Term Expenditure Framework and Fiscal Strategic Paper, which would soon be presented to the National Assembly for approval.
Specifically on the 2020 budget, the minister stated that the sum of N10.07tn had been proposed.
The country’s budget for 2019 was N8.912tn.
Asked to speak on the performance of the 2019 budget, Ahmed replied that recurrent expenditure had scored 100 per cent since the implementation began, while close to N300bn had been released for capital expenditure so far.
The minister said total expected revenue for 2020 was N7.5tn, “and N2.09tn that will be accruing to the Federation Account and the VAT respectively.”
Ahmed said, “The Federal Government will be receiving proposed aggregate of N4.26tn from the federal account and the VAT pool, while the states and the local governments are expected to receive N3.04tn and N2.27tn respectively.
“The 2020 budget has a debt service estimated at N2.45tn and a sinking fund to retire maturing obligations issued to local contractors and other creditors in the sum of N296bn.
“So, there is a total sum of N3.43tn that is provided for personnel and pension cost inclusive of N218bn for the top 19 government-owned enterprises in the country.”
Meanwhile, the council approved N182. 68bn for road projects across the country, including the extension of Lagos-Badagry Expressway to Benin-Nigeria border, which had a provision of N15.2bn.
The Minister of State for Works and Housing, Abubakar Aliyu, who spoke on the issue, said 14 other roads were approved.
On his part, the Minister of Transportation, Mr Rotimi Amaechi, said the council approved the revised estimate for the rehabilitation of Itakpe/Ajaokuta rail line.
He spoke further, “The contract was awarded for $122m but we requested for a total of $56m additional work, which was broken into $38.8m additional work and $17.2m variation, bringing the contract of Itakpe to Warri to a total of $178.7m.
“Then we also requested for Lagos to Ibadan with extension to Lagos port complex in Apapa; we asked for additional work for $374m with another variation of $282m, which totalled to $656.8m.
“This will be added to $1.5bn that the contract was initially awarded.”
Tags
Business