The International Monetary Fund is pressing the federal government to extend value-added tax to fuel products and levy new charges on telecommunications services, warning that the government’s spending ambitions outpace its current capacity to raise money.
- +IMF tells FG to tax fuel, telecom services as revenue gap widens
“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 Washington-based lender said in recommendations, contained in the fund’s 2026 Article IV consultation report on Nigeria.
“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 Washington-based lender said in recommendations, contained in the fund’s 2026 Article IV consultation report on Nigeria.
Nigeria’s federal government has ramped up capital spending in the 2026 budget, but the IMF cautioned that there is little room to maintain that trajectory without fresh revenue streams. “Staff’s projections caution that there is limited space to sustain the 2026 ramp up of capital expenditure over the medium-term in the absence of further revenue gains,” the fund said.
The country overhauled its tax framework last year, consolidating several levies and broadening the base of who pays. The IMF acknowledged those reforms could gradually lift collections, particularly if digital tools are deployed to track transactions, verify compliance and reduce opportunities for leakages and graft. But it said administrative improvements alone would not be sufficient to close the gap.
Applying VAT to petrol and diesel, products that were exempted partly to cushion the blow of fuel subsidy removal in 2023, risks feeding directly into transport costs, food prices and household electricity bills. Telecom excise duties, if passed on by operators, would raise the cost of airtime, data and voice calls for the more than 150 million Nigerians who rely on mobile networks for daily communication and commerce.
“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 IMF said.
The IMF noted that higher global prices for fuel, food and fertilisers would simultaneously improve Nigeria’s export earnings and government revenues while stoking inflation, with the heaviest burden falling on the poorest households.
“Higher global fuel, food and fertilizer prices will improve exports and fiscal revenues, but also give rise to inflationary pressures, potentially aggravating poverty and food insecurity,” the institution said.
