Consumption as a component of gross domestic product has seen uptick in the past year as revenue from value-added tax (VAT) grew 10 percent year-on-year to N204.77 billion.
To this end, analysts are saying that Nigeria may be gradually ‘vatting’ her way out of recession if the goods consumed are indeed locally produced.
In economics terms, increases in consumption raise GDP by the same amount. Again, since GDP per capital is an important determinant of consumption, the increase of income will be followed by a further rise in consumption. Thus there is always a positive feedback loop between consumption and income.
The Nigerian economy slipped into recession 17 months ago, the worst the country has experienced in 29 years. However, with favourable indices in the past quarter, analysts have since postulated that the country is fast coming out of the recession.
Data released Tuesday by the National Bureau of Statistic (NBS) on value-added taxes (VAT) collected from 28 key sectors of the economy show a growth of 10 percent year-on-year as against a five percent decline in the 2015 and 2016.
In all, 17 of the 28 sectors covered in the report recorded growth in VAT as against 16 a year ago, with variations in growth higher than in the comparable period last year. The amount of VAT collected by the government ballooned to N204.77 billion in the first quarter of 2017 as against N186.43 billion in the corresponding period of 2016.
The Federal Government of Nigeria introduced VAT in 1993 to replace the sales tax with the aim of increasing government revenue base.
The recently released figures cover key sectors including agriculture and plantations, banks & financial institutions, breweries, bottling and beverages, building and construction, chemicals, petro-chemical and petroleum refineries, pharmaceutical, and professional services.
NBS data shows that growth in VAT was driven primarily by improvement in takings from the petrochemical and petroleum industry, which saw a growth of 101 percent. Banking and finance posted a 42 percent improvement in VAT, while publishing and printing paper packaging saw a 55 percent growth. Also, the building and construction segment of the economy recorded a VAT growth of 50%.
However, there were a number of important sectors that saw decline in collected taxes, key among them is the Agric and Plantations segment of the economy which contributes about 23 percent of Nigeria’s GDP. The sector saw a VAT decline of four percent.
By OBODO EJIRO & NIYI JACOBS