Manufacturing VAT Surges 54.7% to N875bn in Nine Months

By Abah Margaret

Nigeria’s manufacturing sector significantly increased its contribution to Value Added Tax (VAT) in 2025, with total payments rising to N875.42 billion in the first nine months of the year.

This figure surpasses the N566.01 billion recorded during the same period in 2024 and also exceeds the N578.39 billion generated by the sector throughout the entire 2023 fiscal year.

A comparative analysis shows that VAT remittances from manufacturers grew by 54.7 per cent year-on-year between January and September 2025. The increase reflects stronger tax remittances across the industrial value chain and highlights the sector’s growing importance to Nigeria’s non-oil tax revenue base.

In absolute terms, manufacturers paid N309.41 billion more VAT in the first nine months of 2025 compared with the same period in 2024.

The N875.42 billion generated within nine months of 2025 also exceeds the total VAT contribution recorded in 2023 by about 51.3 per cent, indicating a sharp rise in tax remittances from the sector.

Data from the Q3 2025 VAT report released by the National Bureau of Statistics (NBS) shows that the top three sectors contributing to VAT in the third quarter were Manufacturing (25.89%), Information and Communication (18.77%), and Mining and Quarrying (14.85%).

The manufacturing sector also ranked as the largest contributor to VAT in the first and second quarters of 2025, accounting for 26.03 per cent in Q1 and 27.19 per cent in Q2.

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

Despite operating under difficult macroeconomic conditions — including high energy costs, foreign exchange volatility, and weak consumer purchasing power — the manufacturing sector has remained one of the largest contributors to VAT revenue in the country.

Economists say the rise in VAT payments underscores the sector’s growing fiscal importance, especially as the Federal Government increasingly depends on non-oil tax revenues to support public finances.

However, analysts caution that the surge in VAT collections does not necessarily indicate a proportional increase in industrial output. According to them, inflation-driven price increases and exchange-rate pressures may have significantly inflated nominal tax collections.

Meanwhile, the Manufacturers Association of Nigeria (MAN) has expressed concern over the rising tax burden on the sector.

The Director-General of MAN, Segun Ajayi-Kadir, warned that the current VAT level, combined with increasing operational costs, is placing significant pressure on manufacturers, weakening competitiveness, and posing a risk to jobs.

“The high VAT rate, alongside other taxes and levies, makes Nigerian products less competitive both locally and internationally when compared with imported goods,” he said.

MAN has repeatedly cautioned the Federal Government against increasing VAT, arguing that higher rates could lead to reduced consumer demand, higher unsold inventories, and declining profitability for manufacturers.

Ajayi-Kadir further noted that increased VAT burdens are often transferred to consumers, disproportionately affecting low- and middle-income earners and potentially undermining the positive impact of recent minimum wage increases.