Tough Times Ahead, As Nigeria Moves To Double Value-Added Tax To 10% As Oil Plunges

Nigeria plans to double the value-added tax rate to 10 percent this year to help shore up government revenue eroded by the declining price of oil, the country’s main export, the Federal Inland Revenue Service said.

“The plan is to increase to 10 percent this year, but we have to consult first with relevant stakeholders,” Sunday Ogungbesan, acting executive chairman of the agency known as FIRS, told reporters on Friday in the commercial capital, Lagos.

Africa’s biggest economy and largest oil producer depends on crude exports for about 70 percent of government revenue and more than 90 percent of foreign exchange. The price of Brent crude has dropped by more than half since peaking in June last year, undermining President Muhammadu Buhari’s ability to deliver on his election promises since he took office in May.

FIRS will put more effort in meeting targets after its collection of 1.97 trillion naira ($9.9 billion) in revenue in the first half fell short of a goal of 2.29 trillion naira, Ogungbesan said.

“If we achieve our revenue targets, to a great extent government deficits will be reduced,” he said. “Our plan is to bring every business into the tax net, this economy can survive outside oil.”