The International Monetary Fund (IMF) has advised the Nigerian government to introduce excise duties on telecommunications services and extend Value Added Tax (VAT) to fuel products as part of broader measures to strengthen its revenue.
The Fund gave the recommendation in its latest Article IV consultation report on Nigeria.
The IMF said Nigeria would need additional tax policy reforms over the medium term to create enough fiscal space for development spending and social interventions, warning that the current pace of capital expenditure may not be sustainable without stronger revenue growth.
The recommendation is coming amidst skyrocketing fuel prices and a recent 50% hike in telecom tariffs.
What the IMF is saying
According to the Fund, robust implementation of Nigeria’s newly signed tax laws should gradually improve revenue collection, but this alone may not be sufficient to meet the country’s fiscal needs.
- “Further tax policy changes will likely be needed—such as increasing the VAT rate, extending VAT to fuel products, rationalizing tax expenditures in particular VAT exemptions on extractive industries and some customs duties, and introducing telecom excises—to complement administrative gains,” the Fund stated.
The IMF, however, stressed that the timing of such reforms must take into account rising poverty levels and food insecurity across the country.
It advised Nigerian authorities to ensure that an effective and well-funded cash transfer system is in place before rolling out additional tax measures that could worsen cost-of-living pressures.
The Fund also urged Nigeria to deepen the use of digital technology in revenue administration to reduce leakages and curb corruption vulnerabilities. According to the report, leveraging digitalization to track, verify, and collect government revenues could significantly improve tax efficiency.
The IMF noted that it is continuing to support Nigerian authorities on tax administration reforms through technical assistance, including the deployment of a resident advisor on tax administration and customs support from its regional technical assistance center.
Get up to speed
In September last year, the Federal Government announced it had scrapped the 5% excise duty earlier imposed on telecommunications services to ease cost pressures for millions of Nigerian subscribers.
- The 5% excise tax on telecommunications was introduced in 2022 under the Buhari administration as part of a plan to raise more non-oil revenue for the government. It covered both voice and data services, with operators directed to remit on or before the 21st of every month.
- Officials justified the levy by pointing to Nigeria’s widening revenue shortfall and the need to expand the tax net beyond oil earnings.
- From the outset, the tax drew criticism from telecom operators who warned that it would place an extra burden on both the industry and consumers.
The Association of Licensed Telecom Operators of Nigeria (ALTON) explained that companies were already struggling with more than 39 different taxes, a 7.5% VAT, and a mandatory 2% contribution of annual revenue to the Nigerian Communications Commission.
What you should know
IMF in the Article IV consultation acknowledged the rising poverty in the country despite the improvement in the macroeconomic conditions of the country.
The report added that rising global prices of fuel, food, and fertilizer are expected to improve Nigeria’s export earnings and fiscal revenues but could also intensify inflationary pressures and worsen hardship for vulnerable households.
The IMF estimated that Nigeria’s economy grew by 4% in 2025 and projected growth at 4.1% in 2026 despite persistent inflationary pressures and higher transportation and food costs weighing on economic activity.
