Nigerian Government Removes 63 Items from VAT (Full List)

The Federal Government of Nigeria has announced the exemption of 63 items from Value-Added Tax (VAT). This is part of a larger strategy to enhance key sectors, particularly energy and the environment, by reducing the tax burden on crucial materials, technologies, and products.

The announcement, which forms a part of the government’s comprehensive tax reforms, was revealed by Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, through a post on X (formerly Twitter).

Outlined in the official Value Added Tax (Modification) Order, 2024, which took effect on September 3, 2024, the government’s decision reflects its commitment to supporting cleaner energy alternatives like Compressed Natural Gas (CNG), Liquefied Petroleum Gas (LPG), and electric vehicles (EVs). It is also seen as part of the government’s efforts to mitigate the impact of the removal of fuel subsidies on the masses.

The exemptions cover a wide array of products, from components needed for the assembly of dual-fuel vehicles to electric vehicle charging systems and biogas-related chemicals.

This announcement follows a series of recent economic measures, including fiscal concessions aimed at revitalizing Nigeria’s ailing oil and gas sector. As disclosed by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, these reforms are part of a larger effort to overhaul Nigeria’s revenue collection framework and strengthen key sectors like oil, gas, and renewable energy. According to Edun, these initiatives will provide “fiscal relief” and foster investment, ultimately helping to drive Nigeria towards a more diversified economy.

One of the key highlights of the VAT exemption order is that it applies retroactively to certain products like Automotive Gas Oil (AGO), taking effect from October 1, 2023, giving businesses significant leeway to adjust their pricing structures. This retroactive application ensures that companies already involved in the supply of these materials can benefit from the tax relief and pass on the savings to consumers.

A Shift Towards a Greener Economy

The VAT exemptions predominantly target industries that support the transition to cleaner energy, such as natural gas and electric vehicle technologies. The Federal Government’s focus on gas-powered vehicles and renewable energy equipment aligns with its commitment to a greener, more sustainable economy, while also attempting to reduce Nigeria’s reliance on fossil fuels.

Items like CNG/LPG dual fuel vehicles, electric vehicles, CNG cylinders, CNG dispensers, and electric vehicle batteries are now tax-exempt. This is expected to significantly lower the costs associated with cleaner energy transportation options, thereby encouraging businesses and consumers to adopt eco-friendly technologies. These items play a vital role in reducing Nigeria’s carbon footprint and diversifying the energy mix.

For instance, the exemption of CNG trucks and CNG truck heads, alongside a wide range of gas processing and storage equipment, signals a strong governmental push toward making CNG more accessible and affordable. This comes at a time when Nigeria is trying to reposition itself as a global hub for gas production and utilization. Additionally, the zero-rated VAT on LPG-related items, including LPG conversion kits and LPG boilers, underscores the government’s emphasis on promoting clean energy alternatives for households and industries.

Addressing Energy Infrastructure

The tax relief extends to key infrastructure components such as steel pipes, valves, fittings, and cryogenic storage tanks used for natural gas processing, reflecting the administration’s intention to incentivize investment in the country’s energy infrastructure. As Nigeria continues to grapple with gas shortages and the need for more efficient energy distribution, these VAT exemptions provide a crucial fiscal stimulus for companies involved in gas processing and distribution.

To boost the use of electric vehicles, items such as electric vehicle charging systems and solar-powered charging systems have also been exempted from VAT. This move is expected to drive down costs for the electric vehicle industry, which remains in its infancy in Nigeria. By offering these exemptions, the government aims to create a more favorable environment for businesses in the renewable energy and electric vehicle markets, encouraging both local and foreign investments.

Promoting Biofuel and Renewable Energy

Another significant focus of the VAT exemption list is the promotion of biofuels and renewable energy alternatives. Items like biogas digesters, biogas compressors, bio-ethanol refinery equipment, fermentation tanks, and various biofuel-related chemicals and enzymes are now exempt from VAT.

This signals the government’s broader strategy to incentivize the biofuel industry, which could help reduce Nigeria’s dependence on crude oil exports while also addressing environmental concerns.

Moreover, the exemption of LNG liquefying equipment, heat exchangers, LNG vaporizers, regasification plants, and other related machinery aims to support the growth of liquefied natural gas (LNG) projects across the country.

Strengthening Nigeria’s Oil and Gas Sector

These reforms come on the heels of fiscal concessions introduced by the Federal Government, particularly for the oil and gas sector. Announced by Edun, these concessions are part of a comprehensive package designed to stabilize and revitalize Nigeria’s energy industry, which has been plagued by years of underinvestment, regulatory challenges, and dwindling revenue from oil production.

The VAT exemptions on items like automotive gas oil and CNG trucks serve to strengthen Nigeria’s oil and gas supply chain while fostering greater efficiency. Given the country’s vast natural gas reserves, the reforms are expected to boost domestic gas consumption and ensure that Nigeria capitalizes on its status as one of the world’s leading gas producers.

Impact on Economic Growth

The VAT exemptions are part of a larger fiscal strategy aimed at revitalizing Nigeria’s economy. In September 2024, the Federal Executive Council (FEC) approved a set of economic stabilization bills aimed at spurring growth through a series of tax reforms and targeted fiscal measures. These bills proposed 10 changes designed to alleviate the country’s fiscal challenges and stimulate economic activity in critical sectors like energy, transportation, and manufacturing.

Full List of Exempted Items

The following is the complete list of items exempted from VAT under the Value Added Tax (Modification) Order, 2024:

1. CNG/LPG Dual Fuel Vehicles
2. Dedicated LPG Vehicles and CNG/LPG Dual Fuel Vehicles
3. Parts, and semi-knocked down units (for assembly) of CNG and LPG buses.
4. Parts, and semi-knocked down units (for assembly) of Electric Vehicle.
5. Electric Vehicles
6. Electric Vehicles Battery
7. Electric Vehicles Charging System
8. Electric Vehicle Solar Charging System
9. LPG/CNG Conversion Kits
10. CNG Cylinders
11. CNG Cascades
12. CNG Dispensers
13. Gas Generators
14. CNG Trucks (Bobtails and Bridgers; fixed axle and semi-trailers
15. Steel Pipes
16. Steel Valves & Fittings
17. SS Tubes & Fittings
18. Storage Tanks (all sizes)
19. Regulators
20. CNG Pumps and Compressors (all types)
21. Steel
22. Pressure Relief Valves
23. Hydraulic press/Rolling machine
24. Heat Treatment Equipment
25. Liquid Level Guage
26. Pumping Housing and Motors
27. Regulator Body
28. Pressure Guage
29. Truck Chassis
30. Metering and Measuring Equipment (including weighbridges, and filling scales)
31. Dispensing equipment (dispensing scales, nozzles, gas filling systems)
32. Safety Features (emergency shutoff valves, pressure relief valves, excess flow valves, breakaway couplings, quick release couplings)
33. Gas water heaters
34. Gas burners for industry
35. Gas boilers
36. Gas washing machines and dryers (launderettes) Household or laundry-type washing machines, including machines that both wash and dry.
37. CNG, LPG, and Cryogenic Hoses Tubes, pipes and hoses, and fittings thereof (for example, joints, elbows, flanges) of plastics.
38. CNG truck heads
39. Gas Leak Detectors
40. Gas air conditioners
41. Cylinder refurbishment equipment
42. Blending skid/unit
43. Odourizing unit
44. Chromatography unit (GC)
45. LNG Liquefying Equipment, Heat Exchangers, LNG Vapourizers, Regasification
46. Plant, Liquefied CNG Compression Terminals
47. LNG Plant, Machinery, Pumps, Compressors, Filters (Including Gas Filters),
48. Weighing Machines, Valves Equipment
49. Cryogenic Storage Tanks, Liquefied CNG Conversion tanks
50. Pipes, Piping Fittings, and Flanges used for Liquefied Natural Gas processing.
51. Electrical Equipment, including Cables for Liquefied Natural Gas processing
52. Steel Plates, Angles, and Bars for Liquefied Natural Gas Processing
53. LNG Related Chemicals
54. Biogas Digester
55. Biogas Compressor
56. De-sulphurization units
57. Dryer
58. Distillation columns for processing biofuels
59. Bio-ethanol refinery equipment
60. Fermentation Tanks
61. Biofuel-related Chemicals, Enzymes and Reagents
62. Liquefied Petroleum Gas
63. Compressed Natural Gas
64. Feed Gas
65. Automotive gas oil