Banks, insurance companies, Pension Funds Administrators and other financial
institutions in Nigeria contributed N534.72 billion to the total sum of N11.03
trillion generated as Value Added Tax (VAT) payments in the country between
January 2025 and March this year, findings by New Telegraph show.
The amount is 30.57 per cent, or N125.19 billion, higher than the N409.53
billion that the sector contributed to the N8.78 trillion that the nation generated
as VAT between January 2024 and March last year.
An analysis of “Sectoral Distribution of Value Added Tax” reports for Q1-Q4-
2025 and Q1 2026 released by the National Bureau of Statistics (NBS), shows
that financial and insurance services contributed the total sum of N421.09
billion to the N8.61 trillion generated as VAT last year, while in the first quarter
of 2026, the services contributed N113.63 billion to the N2.42 trillion collected
as VAT.
Further analysis of data obtained from the NBS shows a steady increase in VAT
collections by banks and other financial institutions between 2020 and 2025
compared to earlier years.
Specifically, the data indicates that VAT sectoral collection for financial and
insurance activities stood at N24.77 billion in 2020, N67.91 billion in 2021,
N109.3 billion in 2022, N215.8 billion in 2023, N303.45 billion in 2024 and
N421.09 billion in 2025.
Analysts attribute the sharp increase in VAT collections by financial institutions
from 2021 up to the present, to factors such as the Federal Government’s hike in
the VAT rate from 5 percent to 7.5 per cent in February 2020, the expansion of
digital financial services and the country’s high rate of inflation.
As part of its efforts to boost revenue, the Federal Government had proposed to
increase the VAT rate from 7.5 percent to 10 percent under its comprehensive
tax reforms, which resulted in the signing into law of four new Acts- the Nigeria
Tax Act (NTA) 2025, the Nigeria Tax Administration Act (NTAA) 2025, the
Nigeria Revenue Service (Establishment) Act (NRSEA) 2025 and the Joint
Revenue Board (Establishment) Act (JRBEA) 2025- in June last year.
But with the National Assembly rejecting the proposal, it meant that under the
country’s new tax laws, which took effect from January this year, the VAT rate
was left unchanged at 7.5 per cent.
However, with the new tax laws significantly boosting VAT revenue for the 36
states by increasing their Federation Accounts Allocation Committee (FAAC)
share from 50 per cent to 55 per cent, analysts believe that VAT collections are
likely to maintain an upward trend in the coming months.