Nigerians Feel the Pinch as VAT Adds to Rising Living Costs
Nigerians are increasingly feeling the pinch of Value Added Tax (VAT) as stubbornly high prices and shrinking purchasing power continue to squeeze household budgets.
Consumers, traders and small business owners say the rising cost of goods and services is making everyday expenses more difficult to manage, with many households resorting to smaller purchases and cheaper alternatives.
Although businesses collect and remit VAT, the tax is ultimately reflected in the prices consumers pay for taxable goods and services. Nigeria’s standard VAT rate remains 7.5 per cent under the Nigeria Tax Act 2025.
The pressure is particularly evident among retailers, who are grappling with higher restocking and operating costs. Many say they are being forced to adjust prices to remain in business, even as customers cut back on purchases.
Financial analyst Abayomi Tairu said consumption taxes can place a heavier burden on low-income earners because poorer households typically devote a larger proportion of their income to essential goods and services.
While some essential goods and services are exempt from or zero-rated for VAT, consumers say the relief has been overshadowed by broader inflationary pressures affecting food, transportation and other household expenses.
The latest concerns come against the backdrop of Nigeria’s continuing cost-of-living challenges. The National Bureau of Statistics reported that headline inflation eased marginally to 15.91 per cent in June 2026, but food prices continued to rise, highlighting the uneven nature of the recovery.
The International Monetary Fund has similarly warned that higher food, fuel and fertiliser prices could intensify inflationary pressures and worsen poverty and food insecurity, despite improvements in Nigeria’s broader macroeconomic indicators.
For small businesses, the squeeze is two-sided: operating expenses and tax obligations are rising while consumers have less money to spend. Retailers say raising prices risks driving customers away, while keeping prices low threatens already thin profit margins.
Tairu called for targeted measures to shield vulnerable households, including broader VAT relief for essential goods, stronger social protection programmes and greater transparency in tax collection. He also advocated increased reliance on direct taxation and support for small and medium-sized businesses.
As the government seeks to strengthen revenue mobilisation, the growing VAT debate underscores a difficult balancing act—raising funds needed to finance public services without placing additional pressure on households already struggling to cope with the high cost of living.
