IMF Proposes Fuel, Telecom Taxes for Nigeria to Boost Revenue

The International Monetary Fund (IMF) has advised the Nigerian government to introduce new taxes on fuel products and telecommunications services as part of broader efforts to raise public revenue and strengthen fiscal capacity for development and social programmes.

The recommendation was contained in the IMF’s 2026 Article IV Consultation report on Nigeria, which stated that additional tax policy reforms may still be required over the medium term despite recent changes to the country’s tax framework.

“Further tax policy changes will likely be needed, including increasing VAT, extending VAT to fuel products, rationalising tax expenditures, and introducing telecom excise duties to complement administrative gains,” the IMF stated.

The Fund, however, cautioned that the implementation of such measures must take into account Nigeria’s rising poverty levels and worsening food insecurity, stressing the need for adequate social protection mechanisms.

“The timing of reforms must consider the poverty and food insecurity situation and ensure that cash transfer systems are properly funded and in place,” the IMF added.

The proposal is expected to trigger fresh national debate, particularly given past resistance to similar measures affecting fuel and telecommunications pricing.

Previous attempts to impose a five per cent excise duty on telecom services were suspended after strong opposition from industry operators, consumers, and civil society groups who argued that the sector was already heavily taxed and burdened by high operating costs.

Similarly, fuel-related taxes have historically faced resistance from labour unions and businesses, especially following subsidy removal and subsequent increases in transportation and living costs.

The IMF noted that improved revenue mobilisation is essential to support Nigeria’s planned public spending and social support programmes, projecting that the recommended measures could generate additional revenue equivalent to 3.9 per cent of GDP within three years.

“A two-percentage-point increase in VAT would yield 0.8 per cent of GDP, removal of tax incentives would generate 0.7 per cent, reforms to income and capital gains tax would contribute 0.6 per cent each, while a top-up tax on multinationals would add 0.5 per cent,” the report stated.

The Fund also indicated that other measures, including telecom excise duties and potential carbon taxes on fuel, could contribute an additional 0.4 per cent of GDP.

Beyond policy adjustments, the IMF highlighted that improvements in tax administration—such as electronic invoicing, better compliance systems, and expanded taxpayer registration—could deliver an additional 3.1 per cent of GDP in revenue gains.

It further acknowledged that recent reforms may temporarily reduce revenue by 2.4 per cent of GDP in the short term, but said combined policy and administrative measures could ultimately increase total revenue by 4.6 per cent over the medium term.

The IMF concluded that stronger revenue mobilisation remains critical as Nigeria continues to face fiscal pressures despite ongoing economic reforms.

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