What is VAT in Nigeria?
Value Added Tax (VAT) in Nigeria is a consumption tax charged on goods and services at the point of sale. The current rate is 7.5%, one of the lowest VAT rates on the African continent. VAT is administered by the Federal Inland Revenue Service (FIRS).
Nigeria introduced VAT in 1993 with an initial rate of 5%. The rate remained unchanged for over 25 years until the Finance Act 2019 — signed into law on 13 January 2020 and effective from 1 February 2020 — raised it to 7.5% to increase government revenue.
VAT registration in Nigeria
All businesses operating in Nigeria are generally required to register for VAT with the FIRS. However, the Finance Act 2021 provides an exemption: companies with annual turnover below ₦25 million are not required to charge or remit VAT. Small businesses and agricultural entities below this threshold are excluded.
Registered businesses must file monthly VAT returns and remit collected VAT by the 21st day of the following month via the FIRS TaxPro-Max online platform.
VAT-exempt goods and services in Nigeria
The following are exempt from VAT in Nigeria under the VAT Act and Finance Acts:
- Basic food items (unprocessed — not commercially processed or packaged)
- Medical and pharmaceutical products and services
- Educational materials (books, instructional materials)
- Locally produced agricultural and veterinary medicine
- Baby products
- Commercial aircraft, commercial aircraft engines, and spare parts
- Commercial cargo vessels and their spare parts
- Exported goods and services
- Plant, machinery, and goods imported for use in free trade zones
- Diplomatic purchases by foreign missions
How to calculate 7.5% VAT in Nigeria
To add VAT to a net price:
- VAT amount = Net price × 0.075
- Total (inc. VAT) = Net price × 1.075
- Example: ₦10,000 (ex. VAT) → Total = ₦10,000 × 1.075 = ₦10,750. VAT = ₦750.
To remove VAT from a gross price (reverse VAT):
- Net price = Gross price ÷ 1.075
- VAT amount = Gross price − Net price
- Example: ₦10,750 (inc. VAT) → Net = ₦10,750 ÷ 1.075 = ₦10,000. VAT = ₦750.