The Sectors That Pay The Highest VAT in Nigeria

The Nigerian economy has displayed significant dynamism in the collection of Value Added Tax (VAT), with some sectors showing exceptional growth while navigating through a maze of challenges.

In 2023, the country earned about N3.64 trillion from VAT, which is an increase of 45.02% from the previous year, according to the National Bureau of Statistics (NBS).

Here are the top 10 sectors by VAT contributions in 2023, underscoring their economic impact, the growth in their tax contributions compared to 2022, and the challenges they continue to face.

These sectors range from the foundational industries like Manufacturing to the rapidly evolving Information and Communication sector, each playing a pivotal role in Nigeria’s economic landscape.

10. Construction
With a substantial 72% leap in VAT payments, the Construction sector’s contributions climbed from N18.9 billion in 2022 to N32.5 billion in 2023.

This surge signals a robust period of development, even as the industry tackles challenges such as fluctuating material costs and a deficit in skilled labour.

Addressing these issues is key to maintaining the sector’s growth and meeting Nigeria’s infrastructural demands.

9. Professional, Scientific, and Technical Activities
The Professional, Scientific, and Technical Activities sector saw VAT contributions increase by 17%, rising from N28.7 billion in 2022 to N33.4 billion in 2023.

This sector’s growth is indicative of the burgeoning demand for specialised professional services in a diversifying economy, although it continues to confront challenges related to innovation, regulation, and competition from global firms.

8. Other Service Activities
The Other Service Activities sector faced a downturn, with VAT contributions decreasing by 12%, from N69.8 billion in 2022 to N61.4 billion in 2023.

This decline reflects the various challenges within the sector, including competition from unregulated entities and a need for increased standardisation and value addition in the services provided.

7. Transportation and Storage
Transportation and Storage reported a 17% rise in VAT contributions, from N62.0 billion in 2022 to N72.4 billion in 2023.

The sector’s growth is hampered by infrastructural deficits and regulatory inefficiencies that, if addressed, could unlock further economic value and efficiency.

6. Wholesale and Retail Trade, Repair of Motor Vehicles and Motorcycles
Demonstrating a stellar performance, this sector’s VAT contributions more than doubled with a 104% increase, soaring from N67.8 billion in 2022 to N138.1 billion in 2023.

Despite this, the sector faces challenges with informal competition and market volatility that need to be navigated for sustained growth.

5. Public Administration and Defence, Compulsory Social Security
This sector saw a 41% increase in VAT contributions, from N128.7 billion in 2022 to N180.9 billion in 2023.

While this indicates an increase in government activity and spending, the sector is still beset by bureaucratic inefficiencies and governance issues that need reform.

4. Financial and Insurance Activities
The Financial and Insurance Activities sector witnessed a near doubling of VAT contributions, with a 98% increase, from N109.3 billion in 2022 to N215.8 billion in 2023.

The sector’s boom is shadowed by challenges including the integration of fintech, regulatory compliance, and cybersecurity risks.

3. Mining and Quarrying
The Mining and Quarrying sector’s VAT contributions rose sharply by 64%, from N158.5 billion in 2022 to N260.0 billion in 2023.

Despite this impressive performance, the sector is confronted with environmental and regulatory issues that need careful management to ensure sustainable development.

2. Information and Communications Technology (ICT)
The Information and Communications Technology sector showed a significant increase of 53% in VAT payments, up from N268.8 billion in 2022 to N412.3 billion in 2023.

As a rapidly evolving sector, it faces challenges such as digital infrastructure needs, regulatory clarity, and the acceleration of digital transformation across industries.

1. Manufacturing
Leading the way, the Manufacturing sector contributed the highest VAT of N578.4 billion in 2023, up from N477.4 billion in 2022, marking a 21% increase.

While it stands as the backbone of Nigeria’s industrialisation, the sector contends with high operating costs, infrastructural constraints, and global supply chain disruptions.

Efforts to streamline operations and invest in infrastructure are crucial for the sustainability of this sector.