The Nigeria Economic Summit Group (NESG) has warned that the Federal Government may struggle with revenue shortfalls if it does not increase the Value-Added Tax (VAT) rate as part of its ongoing tax reforms.
Speaking during a media session in Abuja over the weekend, NESG CEO Dr. Tayo Aduloju stressed that while VAT system reforms are necessary, keeping the current rate unchanged could lead to significant revenue losses. He explained that the tax reform process should focus on simplifying the tax system while also adjusting the VAT rate to maintain revenue stability.
Aduloju noted that reducing the number of taxes alone without increasing VAT could weaken the government’s revenue base. However, he suggested that even if a VAT hike is postponed for three years, achieving a more efficient tax system could boost investor confidence and attract businesses to Nigeria.
He also emphasized the need for better coordination between fiscal and monetary policies to address inflation, especially the impact of high energy costs. According to him, inefficiencies in the petroleum sector continue to drive up prices, affecting the economy.
Meanwhile, the Trade Union Congress (TUC) and the Nigeria Governors’ Forum (NGF) have opposed the proposed VAT increase, warning that it could worsen economic hardship for Nigerians.