The Federal Government of Nigeria is contemplating the introduction of excise duties in the telecoms, lottery, and gambling industries, as well as an increase in the Value Added Tax (VAT) rate. While plans to implement excise duties on telecoms and gambling have been delayed, the VAT rate hike is expected to be put into effect next year.
The IMF Staff report on Nigeria has shed light on this matter, along with other initiatives undertaken by the Federal Government to strengthen revenues and reduce the fiscal deficit in the future.
According to the report, the Federal Government aims to raise the VAT rate from the current 7.5% to 10% in 2025, and subsequently to around 15% by 2026. The proposed increase in the VAT rate will be accompanied by the provision of input credits for services and assets, a reduction in Corporate Income Tax (CIT), and an upsurge in excise duties on tobacco and alcohol.
The report states, “Excises on telecommunications, lotteries, and gambling are under consideration but have been delayed. The authorities’ planned reforms in 2025 include raising the VAT rate—while introducing input credits for services and assets—increased excises on tobacco and alcohol, and rationalization of tax incentives accompanied by a reduction of the corporate income tax (CIT) rate to enhance competitiveness.”
In addition, the Federal Government intends to transfer the responsibility of revenue collection from Ministries, Departments, and Agencies (MDAs) to the Federal Inland Revenue Service (FIRS). This move aims to streamline the revenue collection process and improve efficiency.
The IMF has recommended that these fiscal initiatives be finalized and implemented alongside the 2025 budget.
These proposed measures by the Nigerian Government reflect a concerted effort to bolster revenue streams, reduce the fiscal deficit, and enhance the competitiveness of the country’s tax system. As the plans progress, stakeholders will closely monitor their impact on the affected industries and the overall economy.
