The House of Representatives Committee on Finance may have succumbed to the demands of several pressure groups and decided to retain the Value Added Tax (VAT) at 7.5 per cent.
The retention of VAT at 7.5 per cent, the current rate is one of the high points of the report of the Committee on Finance to be submitted today according to National Assembly sources who confided in InsideBusinessNG that the members agreed to shelve the increment after collating the demands at the recent public hearing on the tax reform bills.
Therefore, the tension generated by the VAT rate increase, especially from the Northern part of the country is expected to subside if the committee of the whole house adopts the Finance Committee’s recommendation on VAT
VAT is a consumption tax on goods and services levied at each stage of the supply chain where value is added, and the proposal for its increase was the most contentious, drawing the highest criticisms of the tax reform bills transmitted to the National Assembly by President Bola Tinubu on October 3, 2025.
The bill proposes a VAT increase to 10 per cent in 2025 from the current rate of 7.5 per cent, 12.5 per cent from 2026 to 2029 and 15 per cent from 2030 onwards while it exempts items like food, education and healthcare from its application.
Although the details of the report are sketchy as of press time, other high points of the report to be laid at the plenary of the House of Representatives are the reversal of the excise duties removed from the Nigeria Customs Service (NCS) while certain items under CAFA that the FIRS was proposed to monitor will go back to the Ministry of Industry, Trade and Investments.
The proposal to increase VAT drew criticism from Nigerians especially the Arewa Consultative Forum (ACF), the Governors Forum, the National Economic Council (NEC) and the National Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA)
Speaking on behalf of the ACF at the recent public hearing by the House of Representatives Committee on Finance, Yerima Ngama, a former minister of state for finance, said the proposed VAT increase would reduce consumer spending and hinder economic growth.
While Ngama said a VAT increase would worsen economic hardship amounting to “punishing” taxpayers, he urged the federal government to expand the tax net and shelve the idea of increasing VAT.
“We should be talking about improving our capacity which is currently about 30 per cent to collect the collectable tax, but not increasing it,” Ngama said.
He recommended retaining the current 7.5 per cent VAT rate, saying Nigerians are already grappling with enormous economic challenges.
“We also believe that the current VAT rate places a significant burden on citizens and businesses,” he said.
“Increasing the rate further could have unintended consequences, such as reducing consumer spending and harming economic growth.”
The Nigeria Governors’ Forum, (NGF) in its rejection of the increase, said the move is untimely.
The governors who backed Tax Reform acknowledged the importance of modernising the tax system to enhance fiscal stability and align with global best practices, and endorsed a revised Value Added Tax, VAT sharing formula to ensure equitable distribution of resources.
They voted against an increase in the VAT rate or reduction in Corporate Income Tax (CIT) at this time, to maintain economic stability and advocated for the continued exemption of essential goods and agricultural produce from VAT to safeguard the welfare of citizens and promote agricultural productivity.
NACCIMA also has sought the retention of VAT at 7.5 per cent to foster economic growth and boost government revenue.
This appeal according to NACCIMA’s National President, Dele Kelvin Oye would stimulate economic activities and ensure long-term revenue growth. “We believe VAT should be pegged at 7.5 per cent. This will grow the economy and result in higher tax revenues for the government,” Oye stated.
The association’s stance is anchored on the argument that lower tax rates create a more favourable business environment, encouraging investments and consumption while enhancing government income in the long term. However, NACCIMA also proposed a safeguard measure to protect government revenues: “Each taxpayer must not pay less than the preceding tax year.”
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