The Nigeria Economic Summit Group (NESG) has cautioned that the Federal Government could face significant revenue shortfalls if it does not increase the Value Added Tax (VAT) rate as part of ongoing tax reforms.
Speaking at a media session in Abuja, NESG CEO Dr. Tayo Aduloju stressed that while reforming the VAT system is crucial, maintaining the current 7.5% rate without an increase could weaken the government’s revenue base. He explained that a balanced approach, simplifying the tax system while adjusting the VAT rate, is essential for sustaining fiscal stability.
VAT Reform and Economic Stability
Aduloju noted that while reducing the number of taxes is a positive step, failing to adjust VAT could hinder government revenue. He suggested that even if a rate increase is delayed by three years, enhancing tax efficiency would still improve Nigeria’s attractiveness to foreign investors.
“If we successfully reform the VAT system and delay the rate hike by three years, we will still achieve efficiency gains and make Nigeria more appealing for investment,” Aduloju said.
Beyond taxation, he emphasised the importance of unlocking investment opportunities by removing legal, regulatory, and policy barriers. He also called for better coordination between monetary and fiscal policies to address inflation, particularly rising energy costs and inefficiencies in the petroleum sector.
Opposition to VAT Increase
However, the proposal to raise VAT has been met with resistance. The Trade Union Congress of Nigeria (TUC) and the Nigeria Governors’ Forum have warned that higher taxes could exacerbate economic hardship for Nigerians.
In response, the House of Representatives rejected a proposal to gradually increase VAT to 15% by 2030, opting instead to retain the current 7.5% rate.
Despite the pushback, the NESG continues to advocate for a well-structured tax reform that balances economic growth with sustainable revenue generation, ensuring that Nigeria remains a competitive investment destination while meeting its fiscal obligations.
