Banks, insurance companies, Pension Funds Administrators and other financial institutions in the country, contributed N203.24 billion to the total sum of N2.19 trillion generated as domestic (local) Value Added Tax (VAT) payments by the Federal Inland Revenue Service (FIRS) in the first six months of the year, findings by New Telegraph show.
The amount is 37.16 per cent, or N55.06 billion, higher than the N148.18 billion that the sector contributed as VAT in the corresponding period of 2024.
According to the “Sectoral Distribution of Value Added Tax (Q2 2025)” report released by the National Bureau of Statistics (NBS) recently, of the total sum of N1.09 trillion generated by the FIRS as local payments VAT between April and June this year, financial and insurance services contributed the sum of N97.15 billion compared to the N106.09 billion that the sector contributed in the preceding quarter. This means that the sector contributed a total of N203.24 billion to the total amount generated as local payments VAT by the FIRS in H1’25.
By contrast, the VAT contribution from financial and insurance services in the first half of last year amounted to N82.55 billion and N65.62 billion in Q2’ 2024 and Q1’24 respectively.
Indeed, an analysis of data obtained from the NBS indicates a steady increase in VAT collection by banks and other financial institutions between 2020 and 2024 compared to earlier years.
Specifically, the data shows that VAT sectoral collection for financial and insurance activities stood at N24.77 billion in 2020, N67.91 billion in 2021, N109.3 billion in 2022, N215.8 billion in 2023 and N303.45 billion in 2024.
In a circular it issued in March 2021, the FIRS emphasised that all banks and financial institutions- except those granted exemption- are required by the VAT Act to charge VAT on services rendered by them to their customers.
The government’s key revenue collection agency listed some of the services offered by financial institutions that it said will ordinarily attract VAT to include: Commissions charged on forex trading or remittance; commissions on sale of Bank drafts/certified cheques; commissions paid to brokers, reinsurers, underwriters and other insurance agents by an insurer; commission on asset trading; account maintenance fees and ledger fees.
Analysts attribute the significant increase in VAT collections by financial institutions in the last four years to factors such as, the Federal Government’s raising of the VAT rate from 5 percent to 7.5 per cent in February 2020, the expansion of digital financial services, reforms introduced by the FIRS and the country’s high rate of inflation.
New Telegraph reports that in its bid boost revenue, the Federal Government had proposed to increase VAT from 7.5 percent to 10 percent under its comprehensive tax reforms which resulted in the signing into law of four new Acts- the Nigeria Tax Act (NTA) 2025, the Nigeria Tax Administration Act (NTAA) 2025, the Nigeria Revenue Service (Establishment) Act (NRSEA) 2025 and the Joint Revenue Board (Establishment) Act (JRBEA) 2025- in June this year.
