Revenue: IMF asks FG to impose fuel, telecom taxes

The International Monetary Fund has recommended introducing taxes on fuel products and telecommunications services in Nigeria as part of broader measures to increase government revenue and create fiscal space for development spending and social interventions.

The recommendation was contained in the IMF’s 2026 Article IV Consultation report on Nigeria, where the Fund argued that additional tax measures would be needed over the medium term despite the recent overhaul of the country’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 in particular VAT exemptions on extractive industries and some customs duties, and introducing telecom excises—to complement administrative gains,” the IMF said.

The Washington-based institution, however, cautioned that the timing of any new taxes must take into account 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 recommendation is likely to trigger fresh debate across the country, given the sensitivity surrounding fuel prices and telecommunications costs.

A previous attempt by the Federal Government to introduce a five per cent excise duty on telecom services faced widespread opposition from operators, subscribers and consumer advocacy groups before it was eventually suspended and later scrapped.

Telecommunications companies had argued that the sector was already burdened by multiple taxes, rising energy costs, foreign exchange pressures and infrastructure challenges, warning that any additional levy would ultimately be passed on to consumers through higher call and data charges.

Similarly, proposals linked to fuel taxation have generated opposition from labour unions and private sector groups amid concerns over rising living costs following the removal of petrol subsidies and increases in transport and food prices.

The IMF’s latest recommendation comes as it projects that Nigeria will need stronger revenue mobilisation efforts to sustain planned increases in public spending and support vulnerable households.

According to the report, revenue-enhancing tax policies could generate additional revenues equivalent to 3.9 per cent of Gross Domestic Product within three years of implementation. The Fund identified a two-percentage-point increase in the Value Added Tax rate as the single largest contributor, with an estimated revenue gain of 0.8 per cent of GDP.

It also projected that removing pioneer status incentives and revising free zone regulations would generate another 0.7 per cent of GDP, while reforms to capital gains taxation and adjustments to personal income tax bands, allowances and rates would each contribute 0.6 per cent of GDP.

The IMF further estimated that a top-up tax on multinationals and large firms could raise 0.5 per cent of GDP, while rationalising investment allowances would add another 0.4 per cent.

Notably, the category labelled “others”, which includes telecom excise duties and other measures such as a carbon tax on fuel, was projected to contribute an additional 0.4 per cent of GDP in revenue gains.

Beyond new tax measures, the Fund said Nigeria could generate even larger gains through stronger tax administration.

It projected that administrative reforms would yield an additional 3.1 per cent of GDP through improved compliance, enforcement and efforts to reduce informality in the economy.

According to the report, measures such as fiscalisation, electronic invoicing and cross-validation of tax deductions could generate 1.5 per cent of GDP, while expanded tax identification registration and consolidation of taxpayer databases could contribute another 1.6 per cent of GDP.

The IMF acknowledged that some of Nigeria’s recently enacted tax reforms would reduce government revenue in the short term because they were designed to support households and small businesses.

It estimated that revenue-reducing measures would lower revenues by 2.4 per cent of GDP, with expanded VAT input credits, additional zero-rated items and broader exemptions on basic consumption goods accounting for 1.7 percentage points.

Lower corporate income tax obligations for smaller firms would reduce revenues by 0.4 per cent of GDP, while lower personal income tax rates and expanded exemptions for low-income earners would account for another 0.3 percentage point reduction.

Overall, the IMF projected that the combined impact of revenue-enhancing 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 revenue mobilisation had become increasingly important because Nigeria’s fiscal position remained under pressure despite recent reforms.