The Nigeria Economic Summit Group (NESG) has cautioned that the Federal Government risks revenue shortfalls if it does not raise the value-added tax (VAT) rate as part of the ongoing tax reform efforts.
NESG’s Chief Executive Officer, Dr. Tayo Aduloju, made this statement during an interactive media session over the weekend in Abuja.
He stressed that while VAT system reforms are necessary, keeping the current VAT rate unchanged could result in substantial revenue losses for the government.
“Without those rate hikes, the government could lose significant revenue,” Aduloju warned.
He explained that the ongoing fiscal and tax reforms aim to simplify the tax system while ensuring the government generates enough revenue to support its ambitious budgetary plans. However, he cautioned that merely reducing the number of taxes without adjusting the VAT rate could weaken the government’s revenue base.
“If we successfully reform the VAT system, even if we delay a rate hike for three years, it would still be a win. Efficiency gains could attract more companies to invest in Nigeria,” he added.
Aduloju emphasized the need to strike a balance between tax simplification and revenue sustainability, noting that reforms must not compromise the government’s financial stability. He also highlighted the importance of unlocking investment opportunities by addressing legal, regulatory, and policy obstacles that hinder foreign direct investment.
Additionally, he called for better coordination between monetary and fiscal policies to curb inflation, particularly those driven by high energy costs. He argued that inefficiencies in the downstream petroleum sector contribute to persistent price hikes and that energy security remains a crucial factor affecting inflation.
Meanwhile, the Trade Union Congress of Nigeria and the Nigeria Governors’ Forum have opposed the proposed VAT rate increase outlined in the Federal Government’s Tax Reform Bills, warning that it could exacerbate economic hardship for Nigerians.
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