The National Bureau of Statistics (NBS) released the Value Added Tax (VAT) Q3-2022 report, revealing that the VAT collected in Q3-2022 totalled N625.4bn, a 25.0% y/y and 4.2% q/q increase. In the period under review, Local Non-import VAT (+24.5% y/y) printed at N367.9bn, accounting for 58.8% of total VAT, and Foreign Non-import VAT (+50.0% y/y) was N121.9bn and accounted for 19.5% of total VAT receipts. Finally, Import VAT (+9.6% y/y) was N135.6bn accounting for 21.7% of the entire VAT collections.

Panning in on the Local Non-Import VAT, on a year-on-year basis, only three (3) out of the 21 broad-based sectors experienced a contraction in VAT collections, with "Activities of households as employers, undifferentiated goods- and services-producing activities of households for own use" experiencing the most significant contraction of 53.0% y/y. At the other end of the stick, VAT collections relating to "Activities of extraterritorial organisations and bodies" expanded the most, increasing by 1085.5% y/y. This could be attributed to the revised tax laws, which widened the net of foreign companies liable to tax in Nigeria. However, on a quarter-on-quarter basis, VAT collections moderated in nine (9) out of 21 segments. Primarily due to the broad economic slowdown caused by the high-interest rate environment, the rising inflationary pressures, and the reduction in purchasing power of individuals. Noteworthy to mention, collections from the high-growth ICT sector also declined marginally by 3bps q/q.

As we advance, we envisage that VAT receipts will improve significantly in 2023 and beyond. Tax authorities continue implementing new policies to improve the country's tax administration efficiency. Policies such as the recently released public notice by the Federal Inland Revenue Service (FIRS) highlighting that effective Jan-2023, in line with the 2004 Value Added Tax (VAT) Act MTNN, AIRTELAFRI and all Money Deposit Banks (MDBs) are appointed to withhold or collect VAT charged on all taxable supplies made to them. This would add these companies to the list, which previously included only oil and gas firms and government agencies.