Taiwo Oyedele: Tax reforms to unlock N3.4trn input VAT credits for businesses

Taiwo Oyedele, chairman of the presidential fiscal policy and tax reforms committee, says businesses will be eligible to claim about N3.4 trillion in input tax credits under Nigeria’s new tax laws.

Input value added tax (VAT) credit allows businesses to recover VAT paid on goods and services used in their operations.

Oyedele spoke at a media parley in Lagos on Friday.

From January, Oyedele said the new law enables eligible recipients to claim input credit, which he described as “receiving money back into your account”.

“So, from next year, input VAT on assets, overheads, and inventory, which can be currently claimed, is also sustained in the new law,” he said.

“Do you know how much this translates to? It is N3.4 trillion based on 2024 VAT collection. This is what the government is giving back to businesses next year by way of input credit.”

Oyedele said one of the most significant aspects of the tax reform package is the overhaul of how VAT is applied to essential goods.

He explained that under the current framework, staples such as bread are exempt from VAT, meaning producers do not charge VAT at the point of sale.

However, Oyedele noted that this exemption carries hidden costs.

He said because exempt goods are ineligible for input VAT recovery, bakers must absorb VAT on nearly all business inputs.

Oyedele said these include raw materials such as flour, sugar, and butter, as well as equipment, fuel, delivery vehicles, phones, and airtime — a structure that ultimately and quietly drives up prices for consumers.

“The current system says ‘that is your problem to deal with.’ So, bakers add those VAT costs to the price of bread, making it more expensive for consumers,” Oyedele said.

“That structure will change from January. Bread and other essential items will move from VAT-exempt to zero-rated status.

“While producers will still charge VAT at 0 percent, they will now be able to reclaim the full VAT paid on their inputs, a shift designed to lower production costs and ease price pressures.”

He added that food, education, and healthcare are now zero-rated.

“Schools from kindergarten to universities will charge 0 percent VAT and recover VAT on laptops, boards, computers, and other inputs. This will help bring down the cost of education,” Oyedele said.

“Not all essential sectors will fall under the zero-rating regime. Transportation and rent will remain VAT-exempt, largely due to the complexity of administering VAT in those areas.

“Together, however, they form part of the five core expenses that dominate household spending: food, housing, transport, healthcare, and education. There is no luxury in those five items.”

Oyedele added that it “does not make sense for a country to be taxing people” on essential commodities that “they need to survive”.