The President Muhammadu Buhari administration has approved an increase in Nigeria’s Value Added Tax (VAT) from five per cent to 7.2 per cent effective next year.
Concise News reports that Nigeria’s Minister of Finance, Budget and National Planning, Hajiya Zainab Ahmed, told newsmen on Wednesday that the decision was to enable government properly fund the new national minimum wage of 30,000 naira.
Ahmed spoke after the Federal Executive Council meeting presided over President Muhammadu Buhari.
“We will begin consultations and consultations will be at various levels in the country. So it includes consultations with the states, with the local governments, with the parliament as well as with the Nigerian public. For the VAT increase to take effect, there has to be an amendment to the VAT Act,” she said.
The minister also said, “The expenditure for the year 2020 is in the total sum of N10.07 trillion. This is three per cent less than the approved expenditure in the 2019 budget that has been passed into law.
“The total expenditure includes statutory transfers, non-debt recurrent expenditure such as salaries and pensions and also the social intervention Programme.”
Speaking on the bailout funds issued to states by the Central Bank of Nigeria (CBN), the minister said it was not a grant but that it was meant to be refunded.
According to her, the 2020 budget has a debt service estimated at N2.45 trillion and a sinking fund to retire maturing obligations issued to local contractors and other creditors in the sum of N296 billion.
“So there is a total sum of N3.43 trillion that is provided for personnel and pension cost inclusive of N218 billion for the top 19 government owned enterprises in the country,” she said.
“This represents an increase of N453 billion over the 2019 approved budgetary expenditure. This also implies a 40 per cent of this recurrent expenditure to the projected revenue.
“The budget deficit is projected at N2.15 trillion in the year 2020 and this is lower than what was approved in the 2019 budget which was N2.47 trillion.
“Let me state that these projections include draw downs on project tied loans and this represents 1.51 per cent of estimated gross domestic product (GDP). This is well below what is allowed by the Fiscal Responsibility Act of 2007 which is still put at three percent.
“I want to add that council approved our presentation and so the next phase for us is to consult with the National Assembly.”