Value-Added Tax on factory production leaps 54.7% to N875 billion in three-quarters of a year

Nigeria's manufacturing sector made a substantial contribution to Value Added Tax (VAT) in 2025, with payments totaling N875.420 billion in the first nine months of the year, exceeding the full-year figure for 2023.

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This significant increase surpasses the N566.011 billion recorded in the same period of 2024 and the N578.394 billion generated in the entire 2023 fiscal year, demonstrating a notable surge in VAT remittances from manufacturers.

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A comparative analysis of the figures reveals a 54.7 per cent year-on-year growth in VAT remittances from manufacturers between January and September 2025, reflecting increased tax remittances across the industrial value chain.

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In absolute terms, manufacturers paid N309.409 billion more VAT in the first nine months of 2025 compared to the same period in 2024, underscoring the sector's growing importance to Nigeria's non-oil tax revenue base.

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The N875.420 billion recorded in just nine months of 2025 exceeds the entire 2023 VAT contribution of N578.394 billion by about 51.3 per cent, indicating a sharp acceleration in tax remittances from the sector.

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A sectoral analysis of the Q3 2025 VAT report released by the National Bureau of Statistics (NBS) shows that the top three activities with the largest shares in Q3 2025 were Manufacturing, Information and communication, and Mining and quarrying, with 25.89%, 18.77%, and 14.85% respectively.

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The manufacturing sector was also the top contributor to VAT in Q1'25 with 26.03% and 27.19% in Q2'25, further solidifying its position as a key contributor to VAT revenue in Nigeria.

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Industry analysts attribute the increase in VAT remittances to higher product prices, rising production costs, and currency depreciation, which have raised the taxable value of manufactured goods across the supply chain.

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Despite operating under challenging macroeconomic conditions, including high energy costs, foreign exchange volatility, and weak consumer purchasing power, the manufacturing sector has continued to rank among the largest contributors to VAT revenue in Nigeria.

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Economists believe that the surge in VAT payments underscores the sector's expanding fiscal significance, particularly as the Federal Government relies increasingly on non-oil taxes to support public finances.

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However, analysts caution that the rise in VAT remittances does not necessarily reflect a proportionate expansion in industrial output, noting that inflation-driven price adjustments and exchange-rate effects may have significantly inflated nominal tax collections.

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The Manufacturers Association of Nigeria (MAN) has expressed deep concerns over the high burden of Value Added Tax (VAT) on the manufacturing sector, despite acknowledging its importance for government revenue, with Director General Segun Ajayi-Kadir warning that current tax levels are putting intense pressure on companies.

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Ajayi-Kadir noted that the high VAT rate, along with other taxes and levies, makes Nigerian products less competitive both locally and internationally, especially when compared to foreign goods, and could lead to job losses.

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MAN has consistently cautioned the Federal Government against raising VAT, arguing it would lead to a demand crunch, increase unsold inventory, and potentially reduce the profitability of manufacturing concerns, with Ajayi-Kadir adding that the burden of increased VAT is directly shifted to consumers.

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Ajayi-Kadir further stated that the burden of increased VAT hurts low- and middle-income earners and could negate the positive impact of national minimum wage increases, highlighting the need for a balanced approach to taxation.