Nigerians lament VAT pressure amid rising living costs

Nigerians are increasingly feeling the pinch of Value Added Tax (VAT) as a combination of rising prices and a weakening currency erodes their purchasing power. Consumers, traders, and small business owners across the country are voicing concerns about the strain on household finances and the growing difficulty in meeting daily expenses.

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I don’t even know how much tax I pay anymore, but everything is just expensive. Every time I restock, prices go up, and I have no choice but to increase my own prices.

The VAT, a consumption tax levied at various stages of production and distribution, ultimately falls on consumers through increased prices. In markets across Lagos and other urban centers, traders report that higher operating and restocking costs have forced them to raise prices. "Every time I restock, prices go up, and I have no choice but to increase my own prices," said Aisha Bello, a provisions trader in Lagos, struggling to keep up with the escalating costs.

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VAT is inherently regressive. Even though it applies broadly, it takes a larger proportion of income from the poor than from the wealthy. That is why exemptions on essential goods are critical.

Financial analyst Abayomi Tairu highlighted the regressive nature of VAT, explaining that it impacts low-income households more severely because they allocate a larger share of their income to basic necessities. "VAT is inherently regressive. Even though it applies broadly, it takes a larger proportion of income from the poor than from the wealthy. That is why exemptions on essential goods are critical," Tairu stated.

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I still spend almost all my income on food and transport. Whether VAT is included or not, prices are just too high.

While Nigeria exempts or zero-rates certain essential goods and services, consumers argue these measures offer little protection against the pervasive effects of inflation and the rising cost of living. Chinedu Okafor, a civil servant in Abuja, lamented that food and transportation costs consume nearly all his income, making the inclusion of VAT almost irrelevant given the high base prices. The economic pressure is forcing behavioral changes, with households cutting back on spending, reducing purchase quantities, and opting for cheaper alternatives. Small and medium-sized businesses, operating on thin margins, face a difficult balancing act between rising operating costs, tax obligations, and dwindling consumer demand.

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People now buy less than they used to. If you increase prices too much, they stop coming.