The Federal Government has announced plans to increase the Value Added Tax (VAT) rate, particularly targeting luxury goods. This confirmation came from the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, during an investor meeting at the IMF/World Bank Annual Meetings in Washington, D.C.
Edun emphasized that the VAT hike will primarily affect luxury items, while essential goods consumed by lower-income and vulnerable Nigerians will remain exempt or attract a zero rate. He explained that the proposed increase, currently being reviewed by the National Assembly, will be implemented in stages, ensuring that the financial burden does not fall on the poor.
“In terms of VAT, President Bola Tinubu’s commitment is clear: while introducing necessary but challenging reforms, the government will protect the poorest and most vulnerable,” Edun said. “The bills currently before the National Assembly aim to raise VAT on luxury goods while maintaining exemptions or zero rates for essential items that ordinary citizens rely on.”
Edun also assured the public that a detailed list of essential goods exempt from VAT would be made available in due course.
This proposed hike aligns with earlier statements made in September by Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee. Oyedele had indicated that the committee was working on a bill to increase VAT from the current 7.5% to 10%, with the possibility of further increases in subsequent years.
Oyedele had remarked, “Our tax revenue situation is dire. Both tax and non-tax revenues are inadequate, putting the fiscal system in a state of crisis. Our mandate as a committee includes reviewing governance, addressing revenue shortfalls, and evaluating government assets.”
He added that even if all of Nigeria’s revenue were allocated solely to infrastructure, it would still be insufficient, underscoring the need for revenue transformation. The proposed law includes a gradual VAT increase starting in 2025, though the timeline for its passage remains uncertain.
