EXCLUSIVE: Nigerians react as 7.5% VAT implementation takes off

By Isa Amodu, Abuja

Nigerians have been reacting to the recently signed Finance Act which the federal government had earlier announced implementation to kick-start by February 1.
The act among other six items seeks to increase Value Added Tax (VAT) from 5 per cent to 7.5 per cent.
Some of them who spoke to GovernanceNews over he weekend expressed mixed feelings; while some say it will add more hardship on the masses, others believe it is necessary for the country to solve its current  challenges in revenue generation.
Babatunde Adigu says the increase of Value Added Tax to 7.5 per cent was in the best interest of the country.
“I have read and watched experts debate the VAT increase on television, what I understand is that it exempts a lot of food items and focuses more on luxury goods.
“On different forum, the minister of finance, budget and national planning had also complained about Nigeria’s inability to generate revenue to fund the budget so government need those revenues,” he said.
In the same vein, an economist, Mercy Bitrus says increase in Nigeria’s Value Added Tax is aimed at improving revenue, and not impoverishing Nigerians the more.
“If you study the document closely, you will realize that that increment dwells more on luxury goods rather than basic items.
“For instance, if you go to the market to buy food items like yam, garri and others to prepare your food, you are not going to pay VAT, but when you enter a cafeteria to eat, you will pay VAT because value has been added,” she said.
Bitrus added, it is expected when Nigerians complain about the current increase due to the current economic situation, but downplayed the insinuation that it will increase hardship in the country.
In a contrary opinion however, a trader Abdulwahab Ayo described the hike of the VAT as insensitivity on the part of government.
He argued that as a trader, he is yet to tackle the food inflation caused by border closure, and now the increase in VAT.
“Since August when border was closed, we know that food prices have risen by almost half of the price, now they have increased Value Added Tax and they said it won’t affect the masses. I think any increase directly or indirectly affects the masses.
“The federal government  would have looked for a way to reopen the border so that food inflation will reduce rather than increasing VAT,” he lamented.
Also, another trader Chidinma Ani said “Nigerians economic situation will be worse with the increase to 7.5 per cent, because government only want to generate revenue and don’t bother about the masses,”
According to her, food prices has been on the rise since the coming of the current administration which had promised to make life more better for citizens.
She expressed doubts whether the Value Added Tax increase will have any impact on the economy saying, “It will be generated to be used by only the rich.”.
Recently, Senate Committee Chairman on Finance, Solomon Olamilekan Adeola, had stated over the weekend that the aspect of the Finance Bill that deals with VAT was amended to favour the states, because about 80 to 85 per cent of the revenue accruing to government from the value added tax will go to the states while the federal government will have just 15 per cent.
He added that now that the implementation has kick-started, no state should complain about inability to pay minimum wage.
“The VAT is meant to assist governors to meet their wage bill. Any governor who wants to play with such money at this point in time is at his peril, because there is the burden of paying the salary.
“With this development, however, no state of the federation could claim inability to pay the minimum wage, because the new VAT law has been sculpted to ease the payment of the minimum wage.
He said that the National Assembly said it has identified over 300 revenue-generating agencies that would enhance the implementation of the 2020 budget, even as it has suggested ways to block leakages that could affect the budget implementation.
“The aspect of the Finance Bill that deals with VAT was amended to favour the states, because about 80 to 85 per cent of the revenue accruing to government from the value added tax will go to the states while the federal government will have just 15 per cent.
“The VAT is meant to assist governors to meet their wage bill. Any governor who wants to play with such money at this point in time is at his peril, because there is the burden of paying the salary.
“What we have done with the VAT increment is to assist the states meet their obligations to the workers. It is only the federal government that has enough money to pay its workers at the moment. About 20 governors have been able to negotiate with their workers and agreed to pay the minimum wage while about 16 are still outstanding,” he further stated.
GovernanceNews reports that the increase has taken effect from February 1st as stated by federal government.