The agro-allied sector remitted N18.3bn in Value Added Tax over three years. Experts recognise the diversification potential as agribusiness expands, urging the Federal Government to pursue a policy to sustain the growth trend and ensure food security, ARINZE NWAFOR writes
The Federal Government’s remittance from Value Added Tax on Agriculture, Forestry and Fishing has surged to N18.3bn from 2022 to 2024, recording a growth of 119.29 per cent in three years.
Data from the National Bureau of Statistics’ report on Sectoral Contributions to VAT show that tax collection from the agro-allied sector rose 15.29 per cent from N4.25bn in 2022 to N4.9bn in 2023, before nearly doubling to N9.15bn in 2024.
This consistent upward trajectory signals both the increasing formalisation of the agricultural value chain and the strong potential of the sector to drive Nigeria’s economic diversification.
Ordinarily, an increase in VAT collection from agriculture implies two things: the government is generating more tax revenue, and agribusiness activity is expanding. But experts warn that without deliberate policy support, this trend may not translate into sustained development or food security.
Stakeholders note that as they become effective in January 2026, the new tax laws will have a significant impact on agriculture. In separate virtual interviews with The PUNCH, these stakeholders expressed concerns about how the reforms, which are designed to streamline taxation, will affect smallholder farmers, processors, and agro-allied industries.
Where the tax money is coming from
Basic food items are tax-exempt. Most agribusinesses enjoy tax breaks which continue into the new tax laws. In the new tax laws, basic food items remain tax-exempt, while locally produced animal feeds, live cattle, goats, sheep and poultry, and agricultural seeds and seedlings are among taxable supplies charged to VAT at zero per cent.
Director of the Centre for Promotion of Private Enterprise, Dr. Muda Yusuf, makes sense of the tax arrangement in the agricultural sector. He considered that company tax and Pay As You Earn tax from employees of agro-allied industries may contribute to the VAT collection figures in the sector.
He explained, “Generally, the agri-sector, particularly the agro-allied sector, is a very big sector in the Nigerian economy. It’s one of the most competitive sectors within the manufacturing space. Because of the strength they have in terms of backwards integration, they are not as heavily exposed to imports as some other manufacturing firms.
“So, because of their size, again, and considering that most of them are essentially in the fast-moving consumer goods space, given the population of the country, we should expect that their contribution to things like VAT is likely to be high. I think that is where it’s coming from.”
Tax figures indicate a growing formal agricultural sector
President of the All Farmers Association of Nigeria, Kabir Ibrahim, observed that rising VAT payments reflect growth in agribusiness and government revenue.
He said, “As VAT charges or payments on agriculture rise, it is an indication of growth in agribusiness, and the government will have money to execute more projects, which implies increasing national prosperity. Stakeholders and all Nigerians will eventually be better served and given impetus to scale, which indicates general economic growth.”
The new tax laws, operational in 2026, are expected to formalise more agricultural activities, reducing leakages and expanding the tax net. Ibrahim concurred that the sector was critical to the government’s diversification agenda, noting, “The new tax laws will help to formalise agribusiness, and the agric sector will grow to an appreciable level.
Provided that all leakages are blocked, Nigeria’s economy will attain greater heights, and our dependence on oil will wane, giving greater impetus to the agricultural sector.”
He explained that the fastest way to increase VAT inflows is to integrate informal farmers into the tax net.
“The best way to increase revenue received into the government’s coffers is to bring in the informal farmers. That’s how the VAT will increase and push the diversification goal,” he said.
Despite the positive revenue trend, stakeholders insist that for agriculture to drive sustainable growth, the government must nurture the sector through tax incentives, credit facilitation, and infrastructural support. They argue that taxation should not stifle growth but rather be used as a tool to encourage value addition, productivity, and competitiveness.
Upscaling agriculture value addition
Stakeholders across the agriculture and agro-allied industries have called on the Federal Government to consolidate the VAT growth momentum by prioritising policies that stimulate investment, improve credit access, and guarantee food security.
AFAN president Ibrahim stressed the need for policies that support smallholder farmers, who form the backbone of Nigeria’s agricultural output.
“The agriculture policies of the government should show that the smallholder farmer is prospering,” he said.
He lauded President Bola Tinubu’s temporary ban on raw shea nut exports as a step in the right direction, emphasising that value addition should be the cornerstone of national policy.
“Dangote is a good example of value addition. He is currently exporting urea as one of the by-products of the Dangote Refinery,” Ibrahim added.
How to balance taxation and food security
Director of the CPPE, Yusuf, earlier explained that agricultural products and inputs have traditionally enjoyed tax exemptions to safeguard food security. He clarified that much of the VAT collected likely stems from agro-allied industries along the value chain.
“VAT on agricultural products, agricultural equipment, inputs, fertilisers, and so on, has been at zero for a long time. Perhaps the VAT we are talking about has to do with agro-allied industries. Because within their supply chain, perhaps there are activities that are VATable,” Yusuf said.
The CPPE director observed that while VAT contributes to government revenue, overburdening the sector would harm food production. He acknowledged that the Federal Government has maintained a policy “that anything that has to do with food and food security will not be subjected to any serious burden of taxation,” confirming his stance that “from a strategic economic development and food security point of view, the disposition of governments is to ensure that these sectors, particularly the agricultural sector, are exempted from VAT.”
Yusuf highlighted the broader economic benefits of a thriving agricultural sector.
“There’s a correlation between the growth of the sector and the revenue effect of the sector on government revenue. If, for instance, they’re able to double their profits, then they will be able to double their company tax, VAT components, and other levies,” he explained. To achieve this, he urged the government to tackle macroeconomic bottlenecks such as poor infrastructure, unstable energy supply, and limited access to credit.
Injecting credit and rejecting overtaxation of agribusinesses
Agricultural expert and Chief Executive Officer of FACCO West Africa, Femi Adelayo, emphasised the importance of reducing the tax burden on agribusinesses to stimulate growth.
“The agricultural sector can thrive if there’s enough food to produce, and those who are doing exports can export. Where tax can come from for governments easily would be if there is a lower tax burden, like I believe they are planning, if there are incentives for the business owner to employ more people,” he said.
Adelayo warned that excessive taxation on inputs and equipment discourages investment and fuels inflation.
“Imagine that you bring in equipment for processing, and then you are paying so much tax on it; the likelihood is to pass down the cost to the end user, and of course, that causes inflation,” he noted.
He also drew attention to the prevalence of informal taxation, ranging from local levies to charges on transportation routes, which weigh heavily on farmers and processors.
“Tax comes in different forms, whether it is tax at the courts, or tax on the roads, or local government tax. Many of those things are still being paid,” he noted.
Instead of adding to these burdens, Adelayo called for subsidies, storage facilities, mechanisation support, and access to low-interest credit.
“If the seed is there and you start eating it, you won’t get anything. But if you give it time and nurture it, you will make it easier. Access to low-digit finance for agriculture is key,” he said.
Produce more agricultural goods to export more
Adelayo further argued that Nigeria’s diversification agenda could be best served by boosting exports of value-added products.
“How the government can make money is to be able to produce more and export more. That’s the simple way. Once we’re able to feed ourselves and export more, it’s a no-brainer that the foreign currency, which is what we want, will come in,” he declared.
He argued that structured export agreements, rather than haphazard arrangements, are crucial for building Nigeria’s reputation in global markets.
“It should be structured such that we know what we’re exporting, whether it is cocoa, cashews, soybeans, or sunflower seeds, and we add value to it before exporting,” he said.
Taxation should not stifle growth
Stakeholders also flagged rising production costs, high energy tariffs, poor logistics, and currency volatility as key challenges. Yusuf called for an enabling environment, noting that it sustains VAT growth and agriculture’s contribution to the economy.
“All of those things will help to create the environment for them to be able to do better in terms of their contribution to revenue,” he said.
Across the board, experts agree that taxation should not stifle growth. Instead, harmonised tax policies and incentives should enable agribusinesses to scale, employ more people, and contribute more significantly to government revenue over time. As Adelayo put it, “You might need to invest now and reap later. Consider it like you’re planting.”
