VAT income raises non-oil revenue as tax reforms change narratives

Nigeria’s improved value-added tax (VAT) collection continues to drive growth in the non-oil sector, resulting in significant diversification away from a hydrocarbon-powered economy.Economic Growth Forecast

The recent tax reform has changed Nigeria’s non-oil revenue story, boosting the country’s fiscal revenue-generation capacity through higher collections.

According to the National Bureau of Statistics (NBS), total VAT collections rose to N2.42 trillion in the first quarter of 2026, representing a 9.98 per cent quarter-on-quarter (QoQ) increase from N2.20 trillion recorded in the fourth quarter of 2025 and a 17.06 per cent year-on-year (YoY) increase compared with the corresponding period of 2025.

In a note, analysts at Cowry Asset Management Limited said the sustained expansion in VAT receipts reflects improving tax administration, stronger compliance, and continued growth across key sectors of the economy.

The composition of VAT collections highlights the increasing importance of domestic economic activities in supporting government revenue, the investment firm said in its review.

Of the total VAT generated during the quarter, local VAT payments accounted for the largest share at N 1.11 trillion, while foreign VAT payments amounted to N830.47 billion and import VAT contributed N477.55 billion.

The continued strength in foreign VAT receipts further reflects the growing contribution of digital services, cross-border transactions, and expanding e-commerce activities, reinforcing the success of recent tax reforms aimed at broadening Nigeria’s non-oil revenue base.Nigeria Trade Data

Sectoral analysis shows that Manufacturing remained the largest contributor to VAT collections during the review period, accounting for 29.75 per cent of total VAT receipts.

The sector also recorded a 12.82 per cent quarter-on-quarter increase, reflecting sustained industrial production, stronger domestic demand, and improved capacity utilisation.

The sector’s dominant contribution underscores its strategic importance to Nigeria’s economic diversification agenda and its continued role as a major source of government revenue.