VAT collections fall in Q4 but show 12.8% yearly growth

Nigeria’s Value Added Tax (VAT) collections fell to N2.19 trillion in the fourth quarter of 2025, representing a 3.78% decrease from the N2.28 trillion recorded in the third quarter. Despite this drop, VAT revenue increased by 12.84% compared to the same period in 2024, showing that taxable economic activities are still growing.

Data from the National Bureau of Statistics (NBS) indicates that overall revenue performance remains strong. This suggests better tax compliance and a gradual expansion of the tax base, even though short-term consumer spending may fluctuate.

Local VAT payments contributed the largest share at N1.16 trillion, while foreign VAT brought in N503.13 billion. Import VAT generated N535.73 billion, reflecting revenue from both domestic and international sources.

Sector performance during the quarter was mixed. Water supply, sewerage, waste management, and remediation activities grew the most at 142%. Real estate grew by 62.16%, and household-related activities increased by 54.36%.

On the other hand, administrative and support services declined by 23.33%, activities of extraterritorial organisations fell by 15.66%, and agriculture, forestry, and fishing dropped by 12.01%.

Manufacturing remained the biggest contributor to VAT revenue at 25.23%, followed by information and communication at 18.89% and mining and quarrying at 14.50%.

The lowest contributions came from household employer activities (0.005%), extraterritorial organisations (0.02%), and water supply-related activities (0.07%).

In the third quarter of 2025, VAT collections were N2.28 trillion, a 10.66% increase from N2.06 trillion in the second quarter.

The government has introduced reforms to improve tax collection, including new tax rules for Micro, Small, and Medium Enterprises (MSMEs) to simplify compliance and encourage more businesses to formalize.

In June 2025, President Bola Tinubu signed four major tax reform bills into law: the Nigeria Tax Bill, the Nigeria Tax Administration Bill, the Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill.

These reforms aim to strengthen Nigeria’s tax system and increase revenue generation over time.