Amid the ongoing controversy surrounding the proposed tax reform bills by the current administration, the Federal Government and 21 states in Nigeria have collectively projected Value Added Tax (VAT) revenue of N2.5 trillion in their respective 2025 budget estimates.
This significant projection excludes any additional funds that may be generated from the implementation of the contentious tax reform bills currently under debate.
VAT, a consumption tax levied on goods and services at each stage of the supply chain where value is added, has emerged as a critical source of revenue for the government.
Recent trends indicate substantial growth in VAT collection, with reports showing an increase of N549 billion within six months under the current administration.
This figure, derived from the Federation Account Allocation Committee’s financial reports between October 2023 and March 2024, highlights the rising importance of VAT in Nigeria's fiscal strategy.
A detailed analysis of the 2025 budget documents from the Federal Government and 21 states revealed a combined VAT revenue projection of approximately N2.53 trillion, marking a remarkable increase of N1 trillion (65.8%) compared to the N1.527 trillion projected in 2024.
In 2024, the Federal Government’s share of VAT revenue was N512.8 billion, but it is expected to rise to N972 billion in 2025. Similarly, several states have also projected significant increases in their VAT revenue for 2025.
Kebbi State, for instance, anticipates N87.3 billion, up from N41 billion in 2024. Kaduna State’s VAT revenue projection increased from N48.2 billion in 2024 to N57.8 billion for 2025.
Oyo State, which earned N78.8 billion from VAT in 2024, has projected N144 billion for 2025, representing an 82.8% increase. Osun State expects N78.1 billion, a substantial rise from the N45.3 billion projected in 2024. Similarly, Ogun State has forecasted N85 billion for 2025, up from N57.7 billion in 2024.
Other states have also outlined optimistic projections. Enugu expects N74.9 billion, Borno N87.3 billion, Ondo N71.5 billion, Kano N97.3 billion, and Katsina N85.9 billion.
These figures represent significant jumps from their 2024 projections of N44 billion, N49.4 billion, N30.3 billion, N76.6 billion, and N46.9 billion, respectively.
The trend continues across states like Ebonyi, Gombe, and Anambra, which project N50.8 billion, N39 billion, and N92.4 billion in VAT revenue, compared to their 2024 estimates of N36.5 billion, N30 billion, and N58.4 billion, respectively.
Abia, Niger, Jigawa, Bauchi, Akwa Ibom, Adamawa, and Delta also forecast notable increases in VAT revenue for 2025. Abia projects N60.6 billion, up from N40 billion in 2024. Niger State anticipates N64.6 billion, compared to N50.6 billion in 2024.
Jigawa forecasts N80 billion, a jump from N45 billion in 2024, while Bauchi expects N78.5 billion, compared to N45 billion the previous year.
Akwa Ibom, Adamawa, and Delta also expect increases, with projections of N70 billion, N52.5 billion, and N46.6 billion, respectively, up from N45 billion, N47 billion, and N45.7 billion in 2024.
While the projected VAT revenue for 2025 reflects optimism about economic recovery and improved tax collection systems, the controversy surrounding the proposed tax reform bills adds uncertainty.
Critics argue that the reforms could place additional burdens on businesses and consumers, while proponents believe they will help diversify government revenue streams and reduce dependency on oil income.
The absence of budget documents from 14 states and the Federal Capital Territory leaves the full picture incomplete.
However, the ambitious VAT projections by the Federal Government and the 21 states underline their reliance on this key revenue source to meet budgetary goals in the face of ongoing fiscal challenges.
As debates over the tax reforms continue, all eyes remain on how the government will navigate the balance between revenue generation and ensuring economic stability for businesses and citizens.
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