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VAT: Exemption of basic goods will boost local production–Experts

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Some experts on Tuesday said the exemption of some basic consumption items from Value Added Tax (VAT) would boost local production and reduce economic hardship.

The experts told the Nigeria News Agency in Ibadan that this was a good development for the local industry.

Mr Tunji Adepeju, an economist, who commended the  government said the items exempted are those thought to be basic to the generality of Nigerian citizens

“When you look at it, the exemption will encourage local production of those basic items.

“Instead of depending on importation that will attract other taxes and duties, local producers can benefit from the opportunity this will create,” he said.

Adepeju further noted that it was likely to make the prices of goods cheaper as well as encourage local production.

“For cost of production there are things one must look at; for instance, if you are making bread, it will require flour and other items.

” At the point of sale of the finished product, that is where VAT comes in.

“Whoever is doing that would have paid VAT on some of the inputs and so when he is now selling at the end of the day or month, he will calculate what was bought against what was sold.

“It will include VAT on the inputs and VAT on the output and there is supposed to be a net difference, with this the producer will now realise some kind of refund due to VAT exemption.

“But for the items not exempted from VAT there might be an increase in price,” he said.

Dr Musbao Babatunde, the Chief Economic Adviser to Gov. Seyi Makinde of Oyo State, said the exclusion of some items was basically to reduce the cost of doing business in the country.

The economist said the government had done well in helping to reduce economic hardship on citizens and improve their purchasing power by the exemption.

“This was a very good opportunity in terms of getting access and getting people to consume the items more,  especially as these are basic items consumed dominantly by low income earners.

“This is a welcome development that will generate lots of opportunities for local producers and reduce costs in the production process.

“It will also promote economic opportunities for people who use these items as inputs for further production,” Babatunde said.

Chief Sola Aboderin, a member of the Ibadan Chamber of Commerce, Industry, Mine and Agriculture, said the increase in VAT from five per cent to 7.5 per cent meant that the cost of production would increase and people would have to pay more on goods.

Aboderin also noted that removing some items and adding other items would ultimately create a balance at the end.    (

Edited by: Mufutau Ojo)

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