Real Sector Accounts For N251bn VAT In Q3 Despite Headwinds
Despite the mounting challenges against manufacturers, the real sector reported the largest Value Added Tax (VAT) in the third quarter of the year, accounting for N251.33 billion of the total N948.07 billion pooled by the Federal Inland Revenue Service (FIRS) in the period.
The VAT collection in the period represents 26.51 percent of the total VAT collection and comes from an industry that has battled low activities occasioned by forex scarcity, an energy crisis, and high operational expenses. In the first half of the year, capacity utilization in the manufacturing sector dropped to 56.5 percent from 57.9 percent in the corresponding half of 2022. This indicates a reduction of 1.4 percentage points in the last year.
Also, the first half of the year showed the sector was struggling with a 2.8 percent increase in monetary value at a period when inflation peaked at 24.08 percent owing to the effect of the naira redesign and the removal of fuel subsidy which took a toll on it.
The inventory of unsold finished products in the manufacturing sector jumped to N271.96 billion in the first half of the year from N187.08 billion in the first half of 2022. This indicates a substantial rise of N84.88 billion or 45.4 percent over this timeframe.
FIRS in the third quarter pooled a total of N948.07 billion, showcasing a remarkable growth rate of 21.34 percent over the previous quarter’s N781.35 billion. A breakdown of this shows N522.08 billion came from local payments, N204.58 billion from foreign VAT payments, and N221.41 billion from import VAT.
Data from the National Bureau of Statistics (NBS) Q3 2023 VAT shows that the manufacturing industry claimed the largest share in Q3 2023 with 26.51 percent indicating its significant role in the economy. Information and communication followed closely with 19.04 percent, while financial and insurance activities accounted for 12.31 percent of the contribution.
On the other end of the spectrum, activities of households a employers, undifferentiated goods and services producing activities of households for own use had the smallest share at 0.02 percent, trailed by water supply, sewage, waste management, and remediation activities with 0.06 percent, and activities of extraterritorial organizations and bodies with 0.10 percent.
Analyzing the quarter-on-quarter growth rates across various sectors, agriculture, forestry, and fishing stood out with an exceptional growth rate of 91.87 percent, closely followed by the activities of extraterritorial organizations and bodies with 80.25 percent. Conversely, real estate experienced a decline with a growth rate of -37.68 percent, while construction followed with -9.54 percent.
NBS noted that VAT collections in Q3 2023 experienced a substantial year-on-year increase of 51.60 percent compared to Q3 2022, indicating positive growth and economic progress.
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