The International Monetary Fund (IMF) has advised the Federal Government to consider introducing new taxes on fuel products and telecommunications services as part of measures aimed at boosting revenue generation and strengthening Nigeria’s fiscal position.
The recommendation was contained in the IMF’s 2026 Article IV Consultation Report on Nigeria, which outlined a series of policy options the Fund believes could help the country raise additional revenue, fund critical development projects, and expand social protection programmes.
According to the Washington-based institution, further tax policy adjustments may become necessary over the medium term despite the ongoing reforms in Nigeria’s tax system.
“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—to complement administrative gains,” the Fund stated.
However, the IMF stressed that any decision to introduce additional taxes must be carefully timed to avoid worsening the burden on millions of Nigerians already grappling with poverty and 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 report added.
The recommendation is expected to spark renewed public debate, particularly as fuel prices and telecommunications costs remain highly sensitive issues in the country.
A previous attempt by the Federal Government to impose a five per cent excise duty on telecommunications services faced stiff opposition from telecom operators, consumer groups and subscribers.
The proposal was eventually suspended and later abandoned following widespread criticism.
Industry stakeholders had argued that telecom operators were already contending with multiple taxes, rising energy costs, foreign exchange volatility and infrastructure deficits, warning that any additional levy would ultimately translate into higher costs for consumers through increased call and data tariffs.
Similarly, proposals related to fuel taxation have historically attracted resistance from organised labour, private sector groups and civil society organisations, especially in the wake of the removal of petrol subsidies, which triggered significant increases in transportation and food costs across the country.
The IMF maintained that stronger revenue mobilisation efforts would be essential for Nigeria to sustain planned increases in public expenditure and provide support for vulnerable households.
According to the report, a package of revenue-enhancing tax policies could generate additional revenues equivalent to 3.9 per cent of Gross Domestic Product (GDP) within three years of implementation.
The Fund identified a two-percentage-point increase in the Value Added Tax (VAT) rate as the single largest source of additional revenue, estimating that it could yield about 0.8 per cent of GDP.
It further projected that eliminating pioneer status incentives and reviewing free zone regulations could generate an additional 0.7 per cent of GDP.
Reforms to capital gains taxation, as well as adjustments to personal income tax bands, allowances and rates, were each expected to contribute another 0.6 per cent of GDP.
The IMF also estimated that the introduction of a top-up tax on multinational corporations and large companies could raise 0.5 per cent of GDP, while the rationalisation of investment allowances could contribute an additional 0.4 per cent.
Notably, measures classified under the category of “others” including telecom excise duties and a potential carbon tax on fuel products, were projected to generate an extra 0.4 per cent of GDP in revenue.
Beyond introducing new taxes, the IMF noted that Nigeria stands to realise even greater gains through improved tax administration and enhanced compliance mechanisms.
The report projected that administrative reforms could yield an additional 3.1 per cent of GDP through stronger enforcement, improved compliance systems and efforts to reduce informality within the economy.
Specifically, initiatives such as fiscalisation, electronic invoicing and cross-validation of tax deductions were estimated to generate 1.5 per cent of GDP, while expanded taxpayer registration and the consolidation of taxpayer databases could account for another 1.6 per cent.
The Fund acknowledged that some of the recently enacted tax reforms in Nigeria were designed to provide relief for households and small businesses and would therefore reduce government revenue in the short term.
It estimated that these revenue-reducing measures could lower revenues by 2.4 per cent of GDP. Expanded VAT input credits, additional zero-rated items and wider exemptions on essential consumption goods were expected to account for 1.7 percentage points of the decline.
Lower corporate income tax obligations for smaller businesses were projected to reduce revenues by 0.4 per cent of GDP, while reduced personal income tax rates and expanded exemptions for low-income earners could account for a further 0.3 percentage point decline.
Overall, the IMF projected that the combined effect of revenue-enhancing tax measures, administrative reforms and revenue-reducing policies would result in a net increase in government revenue equivalent to 4.6 per cent of GDP over the medium term.
The Fund argued that stronger domestic revenue mobilisation has become increasingly critical as Nigeria continues to face fiscal pressures despite recent economic and structural reforms aimed at stabilising public finances.
Credit: PUNCH