In a significant move to drive Nigeria’s economic growth, the federal government has officially exempted 63 key items from Value-Added Tax (VAT).
This development forms part of the broader fiscal policy and tax reforms aimed at bolstering various sectors, including clean energy, transportation, and oil and gas.
The announcement was made by Taiwo Oyedele, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, through a post on X (formerly Twitter).
According to Oyedele, the new fiscal measures include the formal extension of VAT suspension on diesel and the addition of VAT exemptions on items critical to advancing clean energy and sustainable transportation.
“A new order has been issued to formalise and extend the suspension of VAT on diesel. In addition, the order grants VAT exemption on CNG, electric vehicles, biogas, and biofuel equipment and accessories for clean cooking and transportation,” Oyedele disclosed.
The details of the exemptions are contained in the official gazette for the ‘Value Added Tax (Modification) Order, 2024,’ dated September 3, 2024.
These measures are designed to incentivize investment in green energy and reduce the cost burden on businesses and consumers within key industries.
The exemption covers critical components and equipment for electric vehicles, compressed natural gas (CNG) and liquefied petroleum gas (LPG) vehicles, biogas production, and liquefied natural gas (LNG) processing.
The VAT exemption is also retroactively applied to Automotive Gas Oil (AGO), commonly known as diesel, from October 1, 2023, providing relief to businesses reliant on diesel, which is integral to logistics and energy production.
Among the items exempted from VAT are vehicles that run on compressed natural gas and liquefied petroleum gas (CNG/LPG), electric vehicles (EVs), as well as parts and semi-knocked-down units for their assembly.
This policy move is expected to lower the cost of adopting alternative fuel technologies, which will promote cleaner and more sustainable transportation options across Nigeria.
Specific exemptions include: CNG/LPG dual-fuel vehicles, electric vehicles, and their parts; EV batteries and solar charging systems; Gas generators and CNG trucks; LPG/CNG conversion kits and dispensers; Gas-related industrial equipment such as boilers and washing machines.
These exemptions represent a decisive step towards encouraging the use of cleaner energy sources, aligning Nigeria with global efforts to reduce carbon emissions and adopt sustainable practices in transportation and industrial processes.
The new fiscal incentives are not limited to clean energy. They also encompass a broad array of equipment and materials vital to the oil and gas industry, furthering Nigeria’s capacity in both upstream and downstream oil and gas operations. This is part of the government’s broader strategy to revitalize the sector and attract investments that will enhance its competitiveness.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, recently unveiled these fiscal reforms. The two main incentives announced include the VAT Modification Order 2024 and the “Oil and Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order 2024.” The latter is specifically targeted at tax incentives related to deep offshore oil and gas production.
Items Exempt from VAT. Transportation and Energy Equipment: CNG/LPG dual fuel vehicles and parts; Electric vehicles, electric vehicle batteries, and charging systems; Solar charging systems for electric vehicles; Gas cylinders, CNG trucks, and cascades; Gas generators, CNG pumps, and compressors.
Industrial Gas Equipment: Gas burners, boilers, water heaters, and washing machines; CNG and LPG dispensers, regulators, and storage tanks; Equipment used in gas leak detection, odorizing, and refineries; various components used in the processing and distribution of LNG, including piping, valves, and filters
Biofuel and Biogas Processing: Biogas digesters and compressors; Equipment for bio-ethanol refinery and biofuel production; Chemicals and enzymes used in biofuel processing; Fermentation tanks and distillation columns.
Oil and Gas Sector Enhancements: Steel pipes, valves, and fittings used in gas and LNG processing; Cryogenic storage tanks and gas leak detectors; Blending and odorizing units for LNG and CNG terminals; LNG liquefying and vaporization equipment.
The government’s VAT exemptions reflect a dual approach to simultaneously support the oil and gas sector and foster innovation in clean energy technologies.
These exemptions are expected to reduce the overall cost of investment in these sectors, attract foreign investment, and spur the growth of small and medium-sized enterprises (SMEs) engaged in the production and distribution of clean energy technologies.
By exempting biofuel, biogas, and LNG-related equipment from VAT, the federal government aims to boost Nigeria’s energy mix, promote environmental sustainability, and ensure energy security in the long term.
The VAT exemptions align with Nigeria’s broader economic goals under the Fiscal Policy and Tax Reform agenda, which seeks to enhance revenue mobilization, reduce tax burdens on strategic sectors, and stimulate economic growth.
With the global energy landscape shifting towards cleaner alternatives, Nigeria’s policy shift marks a critical turning point in promoting sustainable development.
As the nation continues to transition towards a low-carbon economy, the VAT exemptions will provide the necessary fiscal support to make cleaner, greener alternatives more accessible to industries and consumers alike.
The federal government’s decision to exempt 63 key items from VAT underscores its commitment to creating a more sustainable and competitive economic environment.
As industries embrace these fiscal incentives, the anticipated results include an accelerated transition to cleaner energy, stronger industrial performance, and improved energy efficiency.
The VAT exemptions signal a positive shift towards ensuring Nigeria’s long-term economic resilience and sustainability.
