Citing the relaxation of COVID-19 restrictions, analysts at Cowry Asset Management Limited have said that the Federal Government will likely rake in more revenue from Value Added Tax (VAT) in the second half of this year compared with the amount it generated in H1’20.
The analysts made the prediction in the latest edition of the firm’s “Cowry Weekly Financial Markets Review and Outlook” report.
According to data released by the National Bureau of Statistics (NBS) last week, total VAT collected in H1’20 rose by 8.45 per cent to N651.77 billion, from N600.98 billion in H1’19, due to implementation of the 50 per cent increase in the VAT rate to 7.5per cent, which commenced in February 2020.
Specifically, the NBS data indicates that of the N651.77 billion generated in H1’20, N335.82 billion (51.52per cent) was collected as non- import VAT locally, N161.74 billion (24.82per cent) was generated as non-import (foreign) VAT, while import VAT received by the Nigerian Custom Service (NCS) was N154.21 billion (23.66per cent).
Commenting on the NBS numbers, the analysts said: “We expect to see inflow from the VAT line of federally collected revenue to further rise in H2’20 as the negative effect of COVID-19 on economic activities eased at the end of Q2’20 amid relaxation of restriction on movement by the Federal Government.
“Howbeit, the 50 per cent rise in VAT partly impacted the purchasing power of citizens as inflation climbed higher to 12.56per cent in the month of June.”
Meanwhile, the analysts have commended the Central Bank of Nigeria (CBN) for introducing initiatives, which, according to them, have significantly led to businesses in the real sector accessing more credit at lower interest rates.
They noted that the apex bank’s latest depository corporations’ survey report showed a 1.09 per cent rise in Net Domestic Assets (NDA) to N27.77 trillion.
According to the analysts, “on domestic asset creation, the increase in NDA was chiefly driven by a 6.23 per cent jump in Net Domestic Credit (NDC) to N38.05 trillion in H1’20.
“A further breakdown of the NDC showed a 4.13per cent decline in credit to the Government to N8.86 trillion; however, credit to the private sector rose by 9.85per cent rise to N29.18trillion.”