The Minister of Finance, Budget and National Planning, Mrs. Zainab S. Ahmed has said the collection of the value added tax (VAT) is still at a paltry 0.2 percent, well below the African average of 0.33 percent.
The minister disclosed this yesterday at the ongoing economic summit NES #25 in Abuja.
The minister said the poor collection rate, the need to meet capital expenditure spend and to raise funds to pay new wage requirement following the rising of the minimum wage are chiefly responsible for the recent proposal to raise VAT from 5 to 7.5 percent.
“This Administration remains committed to increasing finance for investment health and education, to improve our human capital development indices. However, our target is also to increase funding for capital expenditure such that this constitutes at least 30 percent of Federal budgeted expenditures. Given these aspirations, the government has been compelled to review our fiscal policies including the proposed VAT rate increase” she said.
“Nigeria’s VAT as a share of GDP in Nigeria has declined from 1 percent in 2010-2013 to 0.8 percent in the last four years (2015 – 2018). This is significantly below the median of 5 percent of GDP in other comparable African countries. Nigeria’s low VAT-to-GDP is attributable to the low nominal VAT rate, which at 5 percent is the lowest in the African region (which averages at about 16 percent)” she noted adding that the efficiency of VAT collection, at 0.2, is well below the African regional average of 0.33.
She also noted that the rising Nigerian would have to immediately taken into account if the development challenges of the future would have to be addressed.
“There is an urgent need to design policies that will not only address the rising population but ensure paradigm shift to a competitive private sector led economic growth and development.
“The Agenda for this Summit is therefore, to provide strategic and innovative ways of getting the maximum benefits from the expected demographic dividends,” Zainab noted.