The International Monetary Fund (IMF) has advised the Nigerian government to introduce taxes on fuel products and telecommunications services as part of broader efforts to increase public revenue and create fiscal space for development and social spending.
The recommendation is contained in the IMF’s 2026 Article IV Consultation report on Nigeria. The Fund noted that additional tax policy measures will likely be required over the medium term, despite the country’s recent tax system overhaul.
“Further tax policy changes will likely be needed—such as increasing the VAT rate, extending VAT to fuel products, rationalising tax expenditures... and introducing telecom excises—to complement administrative gains,” the IMF stated.
The Washington-based institution, however, warned that the timing of such reforms must carefully consider Nigeria’s rising poverty levels and worsening food insecurity.
“The timing of reforms must consider the poverty and food insecurity situation and ensure that the cash transfer system is in place and funded,” the Fund added.
The proposal is expected to spark fresh debate across the country, given the high sensitivity around fuel prices and telecom costs. A previous government attempt to impose a five per cent excise duty on telecom services faced strong opposition from operators, subscribers, and consumer groups, leading to its suspension and eventual scrapping.
Telecom operators had argued that the sector was already overburdened with multiple taxes, high energy costs, foreign exchange challenges, and infrastructure deficits, warning that new levies would be passed on to consumers through higher tariffs.
Similarly, any move to tax fuel has historically drawn criticism from labour unions and the private sector, especially following the removal of petrol subsidies and subsequent increases in transportation and food prices.
According to the IMF report, stronger revenue mobilisation is critical to sustain planned increases in public spending and support vulnerable households. The Fund projected that the recommended tax policy changes could generate additional revenues equivalent to 3.9 per cent of Gross Domestic Product (GDP) within three years.
Key contributors include:
- A two-percentage-point increase in the Value Added Tax (VAT) rate, yielding 0.8 per cent of GDP.
- Removal of pioneer status incentives and revision of free zone regulations (0.7 per cent of GDP).
- Reforms to capital gains tax and personal income tax (0.6 per cent of GDP each).
- Top-up tax on multinationals (0.5 per cent of GDP).
The category “others,” which includes telecom excise duties and measures such as a carbon tax on fuel, is projected to add another 0.4 per cent of GDP.
Beyond policy changes, the IMF emphasised that tax administration reforms could deliver even larger gains — an additional 3.1 per cent of GDP — through improved compliance, fiscalisation, electronic invoicing, and better taxpayer registration.
The Fund acknowledged that some of Nigeria’s recent tax reforms would reduce revenue in the short term by 2.4 per cent of GDP to support households and small businesses. However, when combined with revenue-enhancing measures and administrative improvements, the net effect is projected to increase government revenue by 4.6 per cent of GDP over the medium term.
The IMF stressed that stronger revenue mobilisation has become increasingly important as Nigeria’s fiscal position remains under pressure despite recent reforms.
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