Government Plans to Raise VAT to 15%, Targeting Luxury Goods While Protecting Essentials

According to the Minister of Finance, Wale Edun, the Nigerian government is planning to increase the Value Added Tax (VAT) to 15%, focusing on luxury goods. He clarified that essential items commonly used by lower-income households will remain unaffected by the hike. This measure is part of broader economic reforms under President Bola Tinubu’s administration, with the goal of shielding vulnerable groups from the impacts of the changes.

During an investor meeting at the IMF/World Bank Annual Meetings in Washington DC, Edun explained that the bill currently being reviewed by the National Assembly proposes a phased increase in VAT on luxury items, while essentials will either be exempt or subject to a zero rate. He reiterated that the government is committed to protecting the poor while pursuing necessary fiscal reforms.

Details on which goods will remain VAT-exempt will be shared with the public soon.

On the topic of oil production, Edun expressed confidence in the sector, citing improved security in oil-producing areas and new investments from companies like Total and ExxonMobil, which are expected to increase output and enhance foreign exchange earnings.

Regarding the removal of fuel subsidies, Edun noted that while the policy was announced earlier, its full implementation began in September. He highlighted that the economic benefits from subsidy removal would become more evident over time.

Additionally, Edun responded to questions about Nigeria’s economic strategy, particularly the government’s decision to issue domestic dollar bonds despite the International Monetary Fund’s (IMF) advice against it.