The International Monetary Fund (IMF) has advised Nigeria to consider introducing taxes on fuel products and telecommunications services as part of efforts to strengthen government revenue and create more room for development spending and social support programmes.
The recommendation was contained in the Fund’s 2026 Article IV Consultation Report on Nigeria, where it noted that although recent tax reforms are a step in the right direction, additional measures may still be required to improve the country’s revenue profile over the medium term.
According to the IMF, possible options include raising the Value Added Tax (VAT) rate, extending VAT to fuel products, reducing tax exemptions in some sectors, and introducing excise duties on telecommunications services.
“Further tax policy changes will likely be needed to complement administrative gains,” the report stated.
However, the Fund cautioned that any new tax measures should be introduced carefully, given the growing levels of poverty and food insecurity across the country.
“The timing of reforms must consider the poverty and food insecurity situation and ensure that the cash transfer system is in place and adequately funded,” the IMF said.
The proposal is expected to generate fresh debate, particularly because fuel prices and telecom costs remain highly sensitive issues for Nigerians.
A similar attempt by the Federal Government to introduce a five per cent excise duty on telecom services was met with stiff opposition from operators, consumer groups and subscribers before it was eventually suspended and later abandoned.
Telecom operators had argued at the time that the industry was already struggling with multiple taxes, rising energy costs, foreign exchange pressures and infrastructure challenges. They warned that any additional levy would ultimately lead to higher call and data charges for consumers.
Fuel-related taxes have also faced resistance in the past, especially after the removal of petrol subsidies triggered sharp increases in transportation costs and the prices of goods and services.
Despite these concerns, the IMF believes stronger revenue mobilisation is necessary if Nigeria hopes to sustain public spending and provide support for vulnerable citizens.
The report estimates that revenue-enhancing tax measures could generate additional income equivalent to 3.9 per cent of Gross Domestic Product (GDP) within three years.
Among the proposals, a two-percentage-point increase in VAT was identified as the single biggest contributor, with a projected revenue gain of 0.8 per cent of GDP.
The IMF also projected that removing certain tax incentives and reviewing free zone regulations could generate another 0.7 per cent of GDP. Reforms to capital gains tax and adjustments to personal income tax rates and allowances were each expected to contribute about 0.6 per cent of GDP.
A top-up tax on multinational companies and large corporations could add 0.5 per cent of GDP, while changes to investment allowances could generate another 0.4 per cent.
The category labelled “other measures” — including telecom excise duties and possible carbon taxes on fuel products — was projected to contribute an additional 0.4 per cent of GDP.
Beyond introducing new taxes, the IMF argued that Nigeria could significantly improve revenue collection through better tax administration.
According to the report, administrative reforms alone could generate an extra 3.1 per cent of GDP through improved compliance, stronger enforcement and efforts to bring more businesses into the tax net.
Measures such as electronic invoicing, digital tax verification systems and better taxpayer database management were highlighted as key areas that could drive revenue growth.
The Fund acknowledged that some of Nigeria’s recently enacted tax reforms would reduce government revenue in the short term because they are designed to support households and small businesses.
It estimates that these relief measures could lower revenues by about 2.4 per cent of GDP. Expanded VAT exemptions on essential goods, lower tax rates for small businesses and reduced personal income tax obligations for low-income earners account for most of the projected decline.
Overall, however, the IMF expects the combined effect of new tax measures, improved administration and existing reforms to increase Nigeria’s revenue by about 4.6 per cent of GDP over the medium term.
The Fund stressed that stronger revenue mobilisation has become increasingly important as Nigeria continues to face fiscal pressures despite recent economic reforms.
