Citing “expectations of continued inflationary pressures” analysts at CSL Stockbrokers have said that revenue generated from Nigeria’s Value Added Tax (VAT) collection is likely to continue to head north in the coming months.
Commenting on the National Bureau of Statistics’ (NBS) published data on the revenue generated from VAT collections in Q1’22, which showed that total VAT collected in Q1’22 was N588.6 billion, an “improvement of 18.6 per cent y/y and 4.4 per cent q/q compared to N496.3 billion in Q1’21 and N563.7 billion in Q4’21,” the analysts in a report, released at the weekend, also predicted that non-oil revenue in 2022, “arising from VAT and CIT collections will likely outperform 2022 budget estimates.”
The analysts noted that the 18.6 per cent y/y growth in VAT collections in Q1’22 was largely driven by VAT on locally produced goods (i.e., non-import VAT) alongside Nigerian Custom Service (NCS)- Import VAT, which increased by 53.0 per cent y/y and 26.7 per cent y/y, respectively.
According to analysts, “apart from the continued recovery in consumer spending, the increased VAT revenue in Q1’22 can be attributed to the effect of inflation on the prices of goods and services. Since VAT is deducted by applying VAT rate on the value of transactions, an increase in prices of goods and services will necessarily imply growth in VAT collections (+18.6 per cent y/y).”
They added: “Like the improvement in CIT collections (+35.6 per cent y/y), growth in VAT revenue (+18.6 per cent y/y) at the start of the year is quite promising. Given the expectations of continued inflationary pressures, we expect VAT revenue to continue to grow amid the expected consumer spending during election period.
“Hence, just like we saw in 2021, we believe the non-oil revenue in 2022 arising from VAT and CIT collections will likely outperform 2022 budget estimates, which is considered helpful, especially at a time when high subsidy payments and low oil production keep throwing a spanner in the works of oil revenue