Ask what VAT costs in Nigeria and the answer is one number: 7.5%. That is what a VAT-registered business adds to the price of a taxable supply, under the Nigeria Tax Act 2025.
The rate itself
7.5% applies to the value of most goods and services sold in Nigeria. A registered supplier charges it on top of the price, collects it from the buyer, and remits the balance after deducting the VAT it already paid on its own purchases.
What a business charges its customers is output VAT. What it paid on its own costs is input VAT. The gap between the two is what reaches the Nigeria Revenue Service (NRS), formerly FIRS, each month.
Where the rate comes from
This is not a new figure. 7.5% has applied for years, and the Nigeria Tax Act 2025, in force since 1 Jan 2026, kept it rather than raising it.
That is worth knowing, because the wider 2025 tax reform touched a lot of rules. The headline VAT rate was not one of them.
Not every supply pays the standard rate
A defined list of goods and services is zero-rated at 0% under the same Act, covering items such as basic food and exported goods. A different, smaller list is exempt from VAT altogether rather than zero-rated, which changes what a seller can claim back on its own costs.
This is not just wording. Our piece on the small-company tax exemption covers a related but separate threshold, for company income tax rather than VAT, so do not assume one exemption covers the other.
Working out VAT on a sale, an example
Here is a simple example, with made-up numbers. A shop sells an item for ₦20,000 before VAT. At 7.5%, VAT adds ₦1,500. The customer pays ₦21,500 in total.
The shop does not keep that ₦1,500. It is collected on behalf of the Nigeria Revenue Service. The shop then deducts any input VAT it already paid on stock, and remits the rest.
If the shop paid ₦500 of input VAT on stock used for that sale, it remits ₦1,000, not the full ₦1,500. That gap between output and input VAT is what actually reaches the NRS each month.
Who is exempt from charging it at all
A small business under the VAT turnover exemption does not charge 7.5% on anything it sells. Read about that threshold if your turnover is modest and you are unsure whether you must register.
Everyone else registered for VAT charges the standard rate by default, unless what they sell sits on the zero-rated or exempt list.
Common mistakes
- Assuming the 2025 tax reform raised VAT. It consolidated the law but left the headline rate alone.
- Charging the standard rate on a zero-rated or exempt item. Check the lists before assuming 7.5% applies to everything you sell.
- Rounding the rate on an invoice. A rounded figure creates a mismatch against your monthly return.
- Forgetting the rate applies to the full price. VAT is charged on the value of the supply itself, not on a discounted or negotiated afterthought added later.
Watch the NRS and Rev360 hub for any change to the rate, and use the compliance deadline calendar to keep your filing dates straight either way. Once you know what you owe, our guide to filing the VAT monthly return covers the rest, or start a VAT filing directly.