The increase of Value Added Tax (VAT) from 5 to 7.2% by the Federal Executive Council (FEC) on Thursday has been met with controversy.

The president of the Chartered Institute of Taxation of Nigeria (CITN), Dame Olajumoke Simplice, stated the increase was long overdue, as Nigeria's VAT is still currently one of the lowest in the world, and the lowest in the ECOWAS subregion.

In the past, The International Monetary Fund (IMF) encouraged Nigeria to increase its VAT, the revenue to be directed into developmental projects and budget funding; Simplice also echoed these sentiments stating that funds also be used for developmental projects.

Conversely, the Nigeria Employers’ Consultative Association have stated that the VAT increase would lead to closure of many businesses.

Taiwo Oyedele, the Head of Tax and Corporate Advisory Services at  PricewaterhouseCoopers, predicted the VAT rate would shrink Nigeria's GDP growth and income of Nigerians who had to absorb these increments. Oyedele also stated that people were likely to resort to tax evasion to sidestep this increase. 

The Director-General of NECA, Mr Timothy Olawale, noted: “If this new VAT rate is implemented, the purchasing power of the citizens would have been reduced, sales of goods and services will reduce and inventories for business will be high and could lead to closure of businesses that ought to be supported by government in reducing unemployment rate that is currently alarming."

 “Furthermore, the benefits of the recently signed national minimum wage of N30,000 would be neutralised by the proposed increase in the VAT, further reducing the purchasing power of the citizens, leading to increase in prices of goods and services. It will result in upward movement of the inflation rate, and further contraction of the economy.”

Though Olawale conceded that "additional VAT revenue will help reduce budget deficits, reduce government debt and fund social services especially at sub-national level," he also stated that the VAT increase should have not have been applied universally but rather be dependent on financial ability, or limited to luxury or ostentatious goods.

All in all, the recent VAT increase has not been received positively as it is predicted to have a negative outcome on the pockets of Nigerians as a whole.