Nigerians are increasingly concerned about the impact of Value Added Tax as rising prices and weakening purchasing power continue to strain household finances.

The concerns are especially pronounced among consumers, traders and small business owners, who say rising prices of goods and services are making it harder to meet daily expenses.

VAT is a consumption tax collected at different stages of the production and distribution chain. Although businesses are responsible for collecting and remitting the tax, the cost is ultimately borne by consumers through the prices they pay.

In markets across Lagos and other urban centres, traders say rising operating and restocking costs have forced them to increase prices, further straining consumers.

Speaking to The PUNCH, some Lagos residents expressed concern over the impact of the rising tax on their disposable incomes.

A provisions trader, Aisha Bello, said she was struggling to keep up with frequent price increases.

“I don’t even know how much tax I pay anymore, but everything is just expensive. Every time I restock, prices go up, and I have no choice but to increase my own prices,” she said.

Financial analyst Abayomi Tairu said VAT could have a disproportionate impact on low-income households because they spend a larger share of their income on basic necessities.

“VAT is inherently regressive. Even though it applies broadly, it takes a larger proportion of income from the poor than from the wealthy. That is why exemptions on essential goods are critical,” Tairu said.

Nigeria exempts or zero-rates some essential goods and services, including certain food products, medical services and educational materials. However, consumers say such measures have done little to shield them from the wider impact of inflation and rising living costs.

Chinedu Okafor, a civil servant in Abuja, said the rising cost of food and transportation had consumed most of his income.

“I still spend almost all my income on food and transport. Whether VAT is included or not, prices are just too high,” he said.

The pressure is also changing consumer behaviour, with many households cutting back on spending, buying smaller quantities and switching to cheaper alternatives.

Retailers are equally feeling the impact. Small and medium-sized businesses operating on tight margins are struggling to balance higher operating costs, tax obligations and declining consumer demand.

Elias Ifeanyi, a supermarket owner, said customers were becoming increasingly reluctant to buy when prices rise.

“People now buy less than they used to. If you increase prices too much, they stop coming,” he said.

Tairu warned that excessive reliance on consumption taxes could weaken consumer demand and have broader implications for economic growth as households continue to lose purchasing power.

He called for targeted reforms to reduce the burden on vulnerable Nigerians, including expanding VAT exemptions or zero-rating to cover more essential food items, transportation and basic utilities.

He also recommended stronger social protection measures, including targeted cash transfers and food subsidies, as well as greater transparency in tax collection and pricing.

According to him, the government should also strengthen direct taxation, including personal income and corporate taxes, while providing incentives to help small and medium-sized enterprises cope with tax compliance and rising operating costs.

VAT remains an important source of government revenue, but concerns over its impact highlight the challenge of balancing revenue generation with the need to protect households from further economic hardship.

For millions of Nigerians, the debate over VAT is increasingly being felt in the prices of food, transportation and other necessities as households struggle to make their incomes stretch further amid a persistent cost-of-living crisis.