Since its introduction in Nigeria in 1993 under VAT Act No. 102, Value Added Tax (VAT) has remained a major source of revenue for both the federal and state governments. Between 2017 and 2024, VAT generated a total of ₦19.712 trillion, underscoring its critical role in Nigeria’s tax system.
Introduced at a rate of 5%, VAT’s revenue trajectory over this period reflects more than rising collections; it mirrors the country’s economic cycles, policy changes, inflationary pressures, and structural shifts in consumption and compliance. Data from the Nigerian Bureau of Statistics (NBS) and the Federal Inland Revenue Service (FIRS) show consistent growth, with VAT increasingly contributing to total tax revenue. By 2023, VAT accounted for about 19% of Nigeria’s total tax revenue, making it the second-largest source after Corporate Income Tax.
VAT Generation from 2017–2024
In 2017, VAT revenue stood at just under ₦1 trillion as Nigeria slowly emerged from the 2016 recession. Modest economic recovery continued through 2018 and 2019, with receipts reaching about ₦1.2 trillion on the eve of the pandemic. Growth during these years was largely organic and volume-driven, supported by incremental improvements in trade, telecommunications, and basic services rather than aggressive tax policy.
The turning point came in 2020, when the federal government increased VAT from 5% to 7.5%. Despite the economic shocks from the COVID-19 pandemic, revenue rose to around ₦1.5 trillion. The higher rate offset reduced transaction volumes, while essential goods, telecommunications, and digital services continued to perform strongly. Policymakers learned that VAT was far more resilient than oil revenue during economic disruptions.
As the economy reopened in 2021, pent-up demand and improved compliance systems boosted collections, surpassing ₦2 trillion for the first time. By 2022, VAT revenue had climbed to ₦2.51 trillion, despite global supply disruptions and inflationary pressures from the Russia–Ukraine conflict. Rising prices, rather than increased volumes, drove much of this growth.
Related – How To Pay Federal Taxes In Nigeria: TaxPro-Max Xpress Pay Guide (2026)
In 2023, the removal of fuel subsidies and exchange-rate unification caused import prices and inflation to surge above 28%, propelling VAT revenue to ₦3.64 trillion, a 45% increase over the previous year. By 2024, VAT collections skyrocketed to an estimated ₦6.72 trillion, an extraordinary 84% year-on-year jump. This surge reflected persistent inflation, a weak naira, expanded digital transactions, and more aggressive tax administration. Yet, it also highlighted a troubling trend: much of VAT growth was increasingly divorced from real economic expansion and driven primarily by higher prices.
VAT Revenue by Year (₦ Trillion)
- 2017 – 0.972
- 2018 – 1.10
- 2019 – 1.20
- 2020 – 1.50
- 2021 – 2.07
- 2022 – 2.51
- 2023 – 3.64
- 2024 – 6.72
VAT Revenue Projections
Looking ahead, Nigeria’s VAT outlook for 2025–2026 remains strong, even amid broader economic volatility. The surge to ₦6.72 trillion in 2024 indicates that consumption taxes are holding up, supported by improved compliance, wider coverage of imports and digital services, and inflation-driven increases in nominal transaction values.
Budget projections for 2025 present a more conservative picture, with federal and state governments targeting a combined VAT figure of around ₦2.5 trillion. These figures largely reflect expected transfers rather than total FIRS collections and therefore underestimate full revenue potential. Recent NBS data show continued strong inflows into 2025 (Q1 – ₦2.06 trillion; Q2 – ₦2.06 trillion), reinforcing expectations of sustained performance.
Nigeria’s medium-term fiscal framework anticipates steady VAT growth through 2026, driven by broader compliance, economic recovery, and administrative reforms rather than immediate rate increases. While discussions around raising the VAT rate persist, the current 7.5% rate is expected to hold in the near term. Overall, VAT is set to remain a key revenue anchor, though much of its growth continues to reflect price effects rather than real gains in consumer spending.
