Payment Of 7.5% VAT Commences In Nigeria

Nigerians will now start paying 7.5 percent as Value Added Tax (VAT) after its increase was captured in the newly approved 2019 finance law.

President Muhammadu Buhari on Monday in Abuja signed the 2020 Finance Bill into law, increasing it from an initial 5 percent.

A statement by the Special Adviser to the President on Media and Publicity, Femi Adesina explained that the Finance law has five strategic objectives, in terms of achieving incremental, but necessary, changes to our fiscal laws.

“These objectives are; Promoting fiscal equity by mitigating instances of regressive taxation; Reforming domestic tax laws to align with global best practices; Introducing tax incentives for investments in infrastructure and capital markets; Supporting Micro, Small and Medium-sized businesses in line with our Ease of Doing Business Reforms; and Raising Revenues for Government.

“The draft Finance Bill proposes an increase of the VAT rate from five percent to 7.5 percent, as such, the 2020 Appropriation Bill is based on this new VAT rate,” he added.


The Federal Government had in September 2019, announced plans to review the VAT through consultations at various levels in the country.

Minister of Finance Zainab Ahmed who disclosed this, stated that the consultation will be with the states, local governments, and the lawmakers as well as with the Nigerian public before the VAT increase will take effect.

Mrs. Ahmed stressed that the VAT increase will be more beneficial to state governments and Local Government Areas (LGAs) in the country.

The new VAT rate is expected to shore up Federal Government revenue and it is expected to be deployed to fund health and education sectors as well as infrastructure projects.

Some food items have been exempted from the new VAT including; Brown and white bread; Cereals including maize, rice, wheat, millet, barley, and sorghum; Fish of all kinds; Flour and starch meals; Fruits, nuts, pulses and vegetables of various kinds.

Others are; Roots such as yam, cocoyam, sweet and Irish potatoes; Meat and poultry products including eggs; Milk; Salt and herbs of various kinds; and Natural water and table water.

The Federal Government also plans to raise the threshold for VAT registration to N25 million in turnovers per annum, such that the revenue authorities can focus their compliance efforts on larger businesses thereby bringing relief for Micro, Small and Medium-sized businesses.