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Every gigabyte of data you buy doesn’t just fatten telcos’ accounts; it also fattens the government’s purse. Nigeria’s surge in data usage has become one of the government’s most consistent income streams, thanks to Value Added Tax (VAT).
In 2024 alone, VAT from the information and communication sector—primarily dominated by telecoms—amounted to ₦597.65 billion ($398.04 million), a 122.31% rise from the ₦268.84 billion ($179.05 million) recorded in 2022. During the same period, data usage nearly doubled, rising by approximately 88% to 973,455.35 terabytes.
VAT, set at 7.5%, applies to every call, SMS, or megabyte used. As data consumption soars, so do government collections from the sector.
The ICT sector includes telecoms, information services, publishing, motion pictures, sound recording, music production, and broadcasting. However, telecoms alone accounted for 81.45% (₦27.38 trillion or $18.24 billion) of the sector’s total output of ₦33.62 trillion ($22.39 billion) in 2024.
Since 2019, data—not voice—has become the primary driver of telecoms service consumption. MTN’s data revenue increased by 108.46% to ₦1.59 trillion ($1.06 billion) in 2024 from ₦764.82 billion ($509.37 million) in 2022. Voice revenues grew by 25.61% to ₦1.30 trillion ($865.80 million) during the same period.
In 2023, the World Bank attributed the ICT sector’s growth to increased data usage. “The information and communications technology sector, which did not contract even during the 2020 recession, expanded by 10.3% y-o-y due to increased consumption of data services by households and businesses and higher subscriber numbers,” it said.
VAT as a revenue lifeline
Nigeria earns income from both oil-related and non-oil sources but has been shifting away from its oil dependence due to recent price volatility, with tax revenues becoming increasingly vital.
“To shore up revenues, the authorities are addressing low domestic revenue mobilisation through various measures, including strengthening tax administration, and improving tax compliance, particularly in corporate income tax (CIT), an increase in the value-added tax (VAT) rate, and broadening the tax base,” the International Monetary Fund (IMF) said about Nigeria in 2024.
VAT receipts have surged 338.97% since 2020, reaching ₦6.72 trillion ($4.48 billion) in 2024. By August that year, non-oil collections ₦10.33 trillion ($6.88 billion) had surpassed oil revenues ₦9.83 trillion ($6.55 billion). VAT, ₦4.19 trillion ($2.79 billion), was the single largest non-oil revenue source.
The government projects ₦6.95 trillion ($4.63 billion) in VAT collections for 2025, ₦8.04 trillion ($5.36 billion) in 2026, and ₦9.09 trillion ($6.05 billion) in 2027. This revenue is distributed 15% to the federal government, 50% to the 36 states, and 35% to local governments.
To maintain this growth, the government plans to implement reforms to increase VAT receipts by 2026. While the VAT rate remains at 7.5%, recent proposals to raise it to 10% have been halted by the Senate.
“Raising the VAT rate, however, remains a policy option for the government to keep in view over the medium term. In the medium term, the government will further intensify efforts aimed at improving VAT coverage and collection efficiency,” the federal government said.
All this ties into the government’s goal to increase its tax-to-GDP ratio from under 10% to 18% by 2027.
“Until last year, we were doing under 10%. South Africa is doing 26%,” said Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, in June 2025.
Data keeps pulling weight
Nigeria’s data consumption shows no signs of slowing down, and combined with recent tariff hikes, VAT revenues from this sector are expected to continue rising. The country’s monthly data bill jumped by 307.74% to ₦721.18 billion ($480.31 million) in July 2025 from ₦176.87 billion ($117.79 million) in July 2023.
MTN’s data revenue has soared by 379.63% since 2020 to ₦1.59 trillion in 2024 ($1.06 billion), and stood at ₦1.23 trillion ($819.18 million) in the first half of 2025. Airtel’s data revenues are up 50.35% since 2020, hitting $654 million as of its fiscal year ended March 2024.
Operators remain optimistic. “We are positioning ourselves to capture the opportunities of growth for the next 10 years. The demand for data in Nigeria is exceptional and will continue to grow,” said Karl Toriola, the CEO of MTN Nigeria, in a TV interview in January 2025.
According to GSMA, the global industry body for telecom operators, six in ten Nigerians remain offline because smartphones are too expensive. The government, telcos, and advocacy groups are working to close this gap—more smartphones mean more data purchases, which lead to increased VAT revenue.
A decade ago, crude oil was Nigeria’s fiscal lifeline. Today, every gigabyte Nigerians use is becoming just as valuable.
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