By Chinwendu Obienyi
Nigeria’s value-added tax receipts are poised for sustained growth as improving consumer demand and rising price pressures bolster nominal spending, reinforcing government revenue in the near term, analysts at Quest Merchant Bank said on Monday.
This is coming after data from the National Bureau of Statistics (NBS) showed that VAT collections dipped slightly on a quarterly basis in the final three months of 2025, even as full-year receipts exceeded expectations.
Gross VAT revenue declined by 4 per cent from the previous quarter to N2.2 trillion in Q4, largely reflecting weaker inflows from foreign currency-denominated payments.
However, the bank says it expects VAT revenues to trend higher, underpinned by a gradual recovery in household consumption and ongoing improvements in tax compliance.
“Looking ahead, we anticipate sustained growth in VAT receipts, supported by a gradual recovery in household consumption and continued gains from improved tax compliance and the ongoing digitisation of tax administration.
Additionally, the expected rise in headline inflation due to geopolitical tensions is likely to push price pressures higher, support nominal domestic spending, and provide a near term tailwind to headline revenue growth”, Quest Merchant Bank said.
Still, the broader trend remains positive. On a year-on-year basis, collections rose 13 per cent, bringing total VAT receipts for 2025 to NGN8.6 trillion, well above the government’s N7.0 trillion target. The out-turn underscores improving tax efficiency and resilient consumption in Africa’s largest economy.
According to analysts at Quest Merchant Bank, the quarterly slowdown was driven mainly by a drop in non-traditional remittance channels, particularly foreign currency payments, which fell sharply during the period. The naira’s relative strength in the fourth quarter reduced the local currency value of such inflows, weighing on headline VAT performance.
By contrast, domestic VAT payments, which account for just over half of total collections, remained firm. Local receipts rose 3 per cent quarter-on-quarter and jumped 26 per cent from a year earlier to N1.2 trillion, supported by steady activity across key sectors.
Manufacturing retained its position as the largest contributor to VAT revenues, generating N292.1 billion in Q4. The sector accounted for roughly a quarter of domestic VAT and about 13 per cent of total collections, reflecting gradual recovery in industrial output. The information and communication sector followed, with strong growth of 47 per cent year-on-year, highlighting continued expansion in digital services.
Meanwhile, VAT tied to imports increased 12 per cent from the previous quarter to N535.7 billion, buoyed by seasonal demand for foreign goods despite currency appreciation.
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