Value Added Tax (VAT) is a consumption tax charged on goods and services at the rate of 7.5%. However, under the newly tax Acts, there is a distinction between goods and supplies which are VAT exempt and those charged at 0%.
VAT Exempt
Items that are VAT exempt refer to specific goods and services that are not subject to VAT. For goods under this category, neither the seller nor the buyer is required to pay VAT on the transaction. Under section 185 of the NTA 2025, goods that are exempt from VAT include:
a) oil and gas exports ;
b) crude petroleum oil and feed gas for all processed gas ;
c) goods purchased for use in humanitarian donor funded projects provided that the humanitarian donor shall first pay the VAT and request a refund from the Service ;
d) baby products ;
e) locally manufactured sanitary towels, pads or tampons ;
f) military hardware, arms, ammunitions and locally manufactured uniforms supplied to armed forces, para-military and other security agencies of a Nigerian government ;
g) shared passenger road-transport service ;
h) purchase, hire, rental or lease of tractors, ploughs and other equipment used for agricultural purposes.
i) supplies consumed by an approved entity in the export processing or free trade zones, provided that the supplies are consumed on its approved activity ;
j) goods or services supplied to a diplomatic mission, diplomat or person recognised under the Diplomatic Immunities and Privileges Act whose activity is in public interest, and not for profit ;
k) plays and performances conducted by educational institutions as part of learning ;
l) land or building including interest in land or building ;
m) money, stakes or securities including interest in money or securities ;
n) Government licences ; and
o) Assistive devices and disability-related products including hearing aids, wheelchairs, and braille materials.
The following items are also exempted from VAT, until an order is made by the Minister on acollection date for VAT and published in the Federal Government Gazette. They are;
a. petroleum products ;
b. renewable energy equipment ;
c. compressed natural gas (CNG) ;
d. Liquefied Petroleum Gas (LPG) ; and
e. other gaseous hydrocarbons.
0% VAT Items
Zero-rated items, on the other hand, are goods and services that are subject to VAT at a rate of 0%. This means that while VAT is applicable, the rate is effectively zero. What this means is that businesses that make these supplies are still required to register for VAT and file returns, but they do not collect VAT from customers on these supplies. Instead, they can recover input VAT on their purchases relating to those supplies.
Section 186 of the NTA 2025 lists the goods and services subject to zero rate as follows:
(a) Basic food items: The Act defines these to mean an agriculture-based or aquatic-based staple which includes the following items;
i. locally produced table honey
ii. white bread and brown bread
iii. cereals including maize, rice, wheat, millet, barley, sorghum, oats, fonioand finer millet;
iv. cooking oils including, vegetable oil, soya oil, palm oil, groundnut oil, shea butter, beniseed oil, olive oil, coconut oil ; provided that they are of a type and grade suitable for culinary purposes, and do not contain any substance such as, fragrance, which will make them unsuitable for culinary use ;
v. culinary herbs including, curry, thyme, onions, ginger, mint, whether raw or processed ;
vi. fish of all kinds other than ornamental, whether live, fresh, frozen, smoked or dried ;
vii. flour and starch including, corn flour, plantain flour, cassava flour, beans flour, wheat flour, rice flour, yam flour, cassava flakes (garri), whetherbleached or unbleached, refined or unrefined ; provided that it is suitable for culinary purposes ;
viii. fruits including, pineapples, oranges, mangoes, guavas, grape fruit,banana, pawpaw, etc., whether fresh or dried ;
ix. live or raw meat from cow, goat, lamb, pig, poultry, whether butchered or in parts, fresh or frozen, and including poultry eggs ;
x. milk, whether fresh or processed into liquid or powdered form ;
xi. nuts for human consumption such as, groundnut, walnut, cashew nut,hazelnut, kolanut, tigernuts, coconut, etc. whether raw, roasted, dried, fried, boiled or seasoned, cracked or in the shells ;
xii. pulses for human consumption including, beans, lentils, peas, chickpeasand tamarind, etc., whether raw, roasted, fried, boiled, salted or in theirshells ;
xiii. tubers (roots) of yam, cocoyam, potatoes, water-yam, cassava, etc.whether in raw form, flakes or flour for human consumption ;
xiv. salt for only culinary use, means fine salt and salt in retail packs, andexcludes industrial salt ;
xv. vegetables including pepper, melon, lettuce, okra, cabbage, carrot, etc., whether fresh, dried or ground
xvi. water means natural water and table water, including spring water, rain water, pipe borne water or well water except sparkling or flavoured waterand water sold in restaurants, hotels, eateries, lounges, cafes, canteens and other similar settings, and water sold by contractors, caterers or similar persons ;
b) all medical and pharmaceutical products including medicinal herbal products
c) educational books and materials ;
d) fertilisers ;
e) locally produced agricultural chemicals ;
f) locally produced veterinary medicine ;
g) locally produced animal feeds ;
h) live cattle, goats, sheep and poultry ;
i) agricultural seeds and seedlings ;
j) electricity generated by generation companies (GENCOs) and supplied to National Grid or Nigeria Bulk Electricity Trading Company (NBET) ;
k) electricity transmitted by Transmission Company of Nigeria (TCN) to Electricity Distribution Companies (DISCOs)
l) medical services ;
m) tuition relating to nursery, primary, secondary or tertiary education ;
n) exported goods excluding oil and gas ;
o) exported services ;
p) exported incorporeal property;
q) medical equipment.
These measures were introduced to ensure that these items remain affordable for consumers and stimulate economic growth in those sectors.
