Nigeria’s Federal Inland Revenue Service (FIRS) has announced a major breakthrough in tax administration, reporting that it collected more than N600 billion in Value Added Tax (VAT) from foreign digital service providers such as Facebook, Amazon, and Netflix.

The milestone underscores the growing importance of digital taxation in Africa’s largest economy and signals the government’s determination to diversify revenues beyond oil.

The N600 billion haul comes under the 2025 Tax Reform Acts, which mandate non-resident suppliers of digital services to register, collect, and remit VAT on transactions involving Nigerian consumers. For years, such transactions slipped through the tax net, costing the government billions in foregone revenue.

Analysts say the size of this new stream is striking when set against other collections.

According to official data, Company Income Tax (CIT) contributed N1.65 trillion in June 2025 alone, nearly tripling budget expectations. Yet, the N600bn digital VAT already rivals a substantial portion of quarterly CIT inflows, proving the strength of Nigeria’s expanding digital economy.

VAT collections more broadly remain a cornerstone of non-oil revenues. For instance, N678.3 billion was collected in June 2025, while states collectively generated N1.5 trillion in VAT during Q1 2025, with Lagos contributing a record N819.62 billion.

This shows that while domestic consumption continues to anchor VAT, the digital segment has now emerged as a distinct and sustainable pillar.

The shift is part of a wider transformation in Nigeria’s fiscal structure. From January to August 2025, FIRS recorded N20.59 trillion in total tax collections, up 40.5% from the same period in 2024. Non-oil revenues accounted for about N15.69 trillion, their strongest performance on record, making up nearly three-quarters of all receipts.

This performance reflects structural reforms, including new exemptions for small businesses with turnover below N100 million, and a phased reduction in CIT rates from 30 per cent to 27.5 per cent this year and 25 per cent in 2026. While these changes may reduce headline CIT collections from certain taxpayers, the broader goal is to expand compliance and attract investment.

Analysts note that sustaining the N600bn annual intake from foreign digital VAT will depend on several factors. First is enforcement and registration — ensuring all qualifying providers comply. Second is the health of the consumer economy. With inflation and exchange rate volatility squeezing disposable incomes, demand for paid digital services could soften. Third are legal and international dynamics: global minimum tax rules and disputes with multinational firms could affect compliance.

The reforms also empower a new Nigeria Revenue Service, consolidating administrative powers and leveraging technology such as e-invoicing to track transactions. Effective implementation of these systems will determine whether digital VAT becomes a permanent fixture of Nigeria’s tax landscape.

With Nigeria’s tax-to-GDP ratio at 10.8% — well below Africa’s 16% average — the N600bn foreign digital VAT marks progress in broadening the tax base. It complements gains from local VAT and CIT, while demonstrating that non-oil revenues can anchor fiscal stability.

As one Lagos-based analyst puts it: “This is more than just a number. It shows that Nigeria can tax the modern economy — streaming, e-commerce, digital advertising — and turn it into public revenue. The challenge is consistency.”

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