The Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, has confirmed that the federal government plans to raise Value Added Tax (VAT) to 15%, but clarified that the increase would primarily affect luxury goods.
Speaking at an investor meeting during the ongoing IMF/World Bank Annual Meetings in Washington DC, Mr Edun explained that a bill currently before the National Assembly aims to gradually raise VAT on luxury goods, while essential items consumed by poorer and vulnerable Nigerians would remain exempt from VAT or attract a zero rate.
“In terms of VAT, President Bola Tinubu’s commitment is that while implementing difficult and wide-ranging but necessary reforms, the poorest and most vulnerable will be protected,” Edun said. “So, the Bills going through the National Assembly in terms of VAT will raise VAT for the wealthy on luxury goods, while at the same time exempting or applying a zero rate to essentials that the poor and average citizens purchase.”
He added that the list of essential goods exempted from VAT will be made available to the public in due course.
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Optimism About the Oil Sector
Mr. Edun also expressed optimism regarding Nigeria’s oil sector, noting that improved security in oil-producing regions and new investments, particularly by Total and ExxonMobil, would result in increased oil production and boost foreign exchange inflows.
Full Subsidy Removal Took Effect in September
Addressing the issue of fuel subsidy removal, Edun disclosed that while subsidy reform was announced earlier, the full implementation only took effect last month. He emphasized that the savings from the removal would start to have a more significant impact on the economy going forward.
Issuance of Domestic Dollar Bonds Against IMF Advice
In response to a question about the possibility of Nigeria entering an IMF program, Mr. Edun revealed that the Tinubu administration went ahead with the issuance of Domestic Dollar Bonds despite advice from the IMF against such a move.
He reaffirmed that Nigeria continues to maintain a relationship with the IMF as a member, benefiting from the institution’s support, but stressed that the country exercises its autonomy in financial decisions