…Fund says additional tax reforms needed to create fiscal space for development and social spending
The International Monetary Fund (IMF) has urged Nigeria to consider imposing excise duties on telecommunications services and extending Value Added Tax (VAT) to petroleum products as part of broader efforts to strengthen government revenue and improve fiscal sustainability.
The recommendation is contained in the IMF’s latest Article IV Consultation Report on Nigeria, which argues that stronger revenue mobilisation will be necessary to support development projects, social interventions and long-term economic growth.
The proposal comes at a time when Nigerians are grappling with rising living costs, higher fuel prices and a recent 50 per cent increase in telecommunications tariffs.
According to the IMF, the implementation of Nigeria’s newly enacted tax reforms should improve revenue collection over time, but may not be sufficient to meet the country’s growing fiscal needs.
The Fund said additional policy measures may be required, including increasing the VAT rate, extending VAT coverage to fuel products, reducing tax exemptions and introducing excise duties on telecom services.
“Further tax policy changes will likely be needed, such as increasing the VAT rate, extending VAT to fuel products, rationalising tax expenditures, particularly VAT exemptions on extractive industries and some customs duties, and introducing telecom excises,” the IMF stated.
The Fund noted that such measures would complement ongoing efforts to improve tax administration and enhance revenue generation.
While advocating additional taxes, the IMF stressed that authorities must carefully consider the impact on vulnerable Nigerians.
The organisation warned that worsening poverty and food insecurity could be aggravated if new taxes are introduced without adequate social protection measures.
It therefore recommended that government establish a robust and adequately funded cash transfer programme before implementing any additional tax measures that could increase the cost of living.
The IMF also called for greater use of digital technology in tax administration to reduce leakages, improve transparency and strengthen compliance.
According to the Fund, digital systems can help government track revenue flows more efficiently, minimise corruption risks and improve overall tax collection.
The IMF disclosed that it is already supporting Nigeria’s tax reform efforts through technical assistance, including the deployment of a resident tax administration adviser and customs reform support through its regional technical assistance centre.
The recommendation has revived debate over taxation in the telecommunications sector.
In September 2025, the Federal Government scrapped a proposed five per cent excise duty on telecom services in response to concerns about rising business costs and the impact on consumers.
The levy, originally introduced under former President Muhammadu Buhari in 2022, was designed to expand non-oil revenue and applied to voice and data services.
However, telecom operators strongly opposed the tax, arguing that the industry was already burdened by multiple taxes and regulatory charges.
The Association of Licensed Telecom Operators of Nigeria had warned that operators were contending with more than 39 different taxes and levies, in addition to the 7.5 per cent VAT and mandatory regulatory contributions.
Despite concerns about poverty and inflation, the IMF acknowledged that Nigeria’s macroeconomic reforms are beginning to yield positive results.
The Fund estimated that Nigeria’s economy expanded by four per cent in 2025 and projected growth of 4.1 per cent in 2026.
However, it cautioned that persistent inflation, high transportation costs and rising food prices continue to place pressure on households and businesses.
The IMF noted that while higher global prices for oil, food and fertiliser could improve export earnings and government revenue, they may also deepen inflationary pressures and increase hardship for low-income households.
