Financial Institutions’ VAT Contributions Jump 37% To ₦203 Billion In H1 2025
By FIDELUS ZWANSON
NIGERIA’S banks, insurance companies, pension fund administrators, and other financial institutions contributed a total of ₦203.24 billion in Value Added Tax (VAT) during the first half of 2025, marking a 37% increase from the ₦148.18 billion recorded in the same period last year. This surge, according to the National Bureau of Statistics (NBS), underscores the growing fiscal significance of the financial sector in boosting government revenue.
The “Sectoral Distribution of Value Added Tax (Q2 2025)” report shows that financial and insurance services generated ₦97.15 billion in VAT in Q2 alone, up from ₦106.09 billion in the preceding quarter. By comparison, the sector contributed ₦65.62 billion in Q1 2024 and ₦82.55 billion in Q2 2024, reflecting a steady upward trajectory in VAT payments.
Data from 2020 to 2024 highlights a remarkable growth pattern: financial and insurance activities collected ₦24.77 billion in 2020, rising to ₦67.91 billion in 2021, ₦109.3 billion in 2022, ₦215.8 billion in 2023, and ₦303.45 billion in 2024. Analysts attribute this trend to several factors, including the Federal Government’s 2020 increase of the VAT rate from 5% to 7.5%, the expansion of digital financial services, FIRS reforms, and rising inflation, which has broadened the VAT base.
The Federal Inland Revenue Service (FIRS) has consistently reminded financial institutions of their obligation to levy VAT on services such as foreign exchange transactions, remittances, bank drafts, commissions on asset trading, account maintenance fees, and insurance-related commissions, except where exemptions apply.
The government recently intensified its tax reforms to boost revenue further, signing into law four new Acts—the Nigeria Tax Act 2025, Nigeria Tax Administration Act 2025, Nigeria Revenue Service Establishment Act 2025, and Joint Revenue Board Establishment Act 2025. Among proposed measures is an increase in VAT from 7.5% to 10%, aimed at capturing the expanding volume of financial transactions.
The rising VAT contribution from the financial sector not only strengthens the government’s fiscal position but also highlights the sector’s critical role in the evolving Nigerian economy, especially amid ongoing digitalisation and broader financial sector reforms.
