The federal government of Nigeria has told residents of the country to erase the idea of reduction in the value added tax (VAT) paid on products and services.
Secretary to the Government of the Federation (SGF), Mr Boss Mustapha, while speaking at the daily briefing on COVID-19 in Abuja on Friday, said government will not consider the request at this critical time.
He said the global health crisis has affected prices of crude oil at the international market, reducing the revenue generated from the sale of the product.
Nigeria, which is Africa’s largest producer of crude oil, generates over 80 percent of its foreign earnings from the commodity.
In the 2020 budget, the oil benchmark was first fixed at $57 per barrel, but the crash in prices forced a downward review of the yardstick to $30 per barrel.
However, prices further declined at the market to around $17 before selling at the moment between $20 to $30 per barrel.
It is believed that the lower prices of the commodity will pose a huge challenge to the 2020 budget and just a while ago, the International Monetary Fund (IMF) said Nigeria could lose over $26 billion from crude oil exports.
With companies struggling to stay afloat due to the Coronavirus pandemic and many Nigerians expected to lose their jobs, government has been urged to reduce the VAT, which was recently hiked to 7.5 percent in 2020 from 5 percent.
But addressing the matter yesterday, Mr Mustapha, who was appointed by President Muhammadu Buhari as Chairman of the Presidential Task Force (PTF) on COVID-19, stated that the VAT rate cannot be tampered with at this time.
He said the collection of the tax was mainly the alternative source of revenue for government, stressing that only 15 percent of the VAT goes to the federal government, while the remaining 85 percent is shared between the states and local governments.
“Let me say that it would be difficult for government to reduce VAT at this moment because of the current situation.
“What we get from crude oil is very low and tax revenue is the other source of income for government.
“We have to understand that only 15 percent of the VAT comes to the federal government, while the remaining 85 percent goes to the state and local governments. This is the situation we found ourselves,” Mr Mustapha said.