By David Akinmola
The International Monetary Fund (IMF) has urged Nigeria to consider imposing excise duties on telecommunications services and extending Value Added Tax (VAT) to fuel products as part of measures to boost government revenue and create fiscal space for critical infrastructure and social spending.
The recommendation, contained in the IMF’s 2026 Article IV Consultation Report on Nigeria, comes as the Federal Government seeks to strengthen domestic revenue mobilisation amid rising expenditure pressures and growing demands for social protection programmes.
According to the Fund, while recent tax reforms are expected to improve revenue collection and broaden the tax base, additional policy measures may be required over the medium term to support fiscal sustainability and reduce dependence on oil earnings.
The IMF specifically identified a possible increase in the VAT rate, extension of VAT to petroleum products, rationalisation of tax expenditures and the introduction of telecom excise duties as options that could complement ongoing administrative reforms and compliance measures.
The Fund, however, cautioned that the timing of any new taxes should take into account prevailing poverty levels and food insecurity, stressing that reforms should be accompanied by a fully funded and operational cash transfer programme to protect vulnerable households from the impact of higher consumer costs.
“The authorities remain open to further tax-policy adjustments over the medium term, including a possible increase in the VAT rate, extension of VAT to fuel products and the introduction of telecom excises, once the cash-transfer system is fully funded and operational,” the report stated.
The recommendation is expected to trigger debate among stakeholders given the sensitivity of both sectors to consumers and businesses.
Telecommunications operators have historically opposed additional sector-specific taxes, arguing that the industry is already burdened by multiple taxes, rising energy costs, foreign exchange pressures and infrastructure challenges. Previous attempts to introduce a five per cent excise duty on telecom services were resisted by operators and consumer advocacy groups over concerns that subscribers would ultimately bear the additional costs.
Similarly, proposals to extend VAT to fuel products could face opposition from labour groups and private sector organisations, which have repeatedly warned against policies that could increase transportation costs, worsen inflation and further erode household purchasing power.
Despite the concerns, the IMF maintained that stronger revenue mobilisation remains critical to supporting Nigeria’s development objectives and expanding fiscal space for growth-enhancing investments and social intervention programmes.
The Fund noted that recent tax reforms have modernised Nigeria’s tax framework through efforts to broaden the tax base, strengthen compliance and improve enforcement, but added that further measures may be necessary to raise the country’s tax-to-GDP ratio over time.
The recommendations come as the government continues efforts to diversify revenue sources away from crude oil earnings while addressing infrastructure deficits, poverty and food insecurity challenges.
Nigeria’s tax-to-GDP ratio remains among the lowest globally, a development that has consistently limited the government’s capacity to finance public services and development programmes without increasing borrowing.
