The International Monetary Fund (IMF) has advised the Federal Government of Nigeria to consider imposing taxes on fuel products and telecommunications services as part of broader efforts to strengthen revenue generation and create additional fiscal space for development projects and social welfare programmes.
The recommendation was contained in the IMF’s 2026 Article IV Consultation Report on Nigeria, where the global financial institution noted that despite recent tax reforms, additional policy measures would be required to enhance government revenue over the medium term.
According to the IMF, potential reforms could include increasing the Value Added Tax (VAT) rate, extending VAT to fuel products, introducing excise duties on telecommunications services, and reviewing existing tax exemptions and customs duty concessions.
“Further tax policy changes will likely be needed, such as increasing the VAT rate, extending VAT to fuel products, rationalising tax expenditures, particularly VAT exemptions on extractive industries and some customs duties, and introducing telecom excises to complement administrative gains,” the Fund stated.
However, the IMF cautioned that the implementation of any new tax measures should take into account Nigeria’s rising poverty levels, food insecurity challenges, and the need for adequate social protection mechanisms.
The Fund emphasized that any reform programme should be accompanied by a well-funded and functional cash transfer system to cushion the impact on vulnerable households.
The proposal is expected to generate significant public debate, particularly because of the sensitivity surrounding fuel prices and telecommunications costs in Nigeria.
Previous attempts by the Federal Government to introduce a five percent excise duty on telecommunications services faced strong opposition from telecom operators, consumer groups, and subscribers, leading to the eventual suspension and cancellation of the policy.
Industry stakeholders had argued that the telecommunications sector was already burdened by multiple taxes, rising energy costs, foreign exchange challenges, and infrastructure deficits, warning that additional levies would ultimately result in higher costs for consumers.
Similarly, proposals related to fuel taxation have historically faced resistance from labour unions and private sector organizations amid concerns about inflation, transportation costs, and the rising cost of living following the removal of petrol subsidies.
Despite these concerns, the IMF believes stronger revenue mobilisation will be essential to support Nigeria’s growing public expenditure needs and social intervention programmes.
The report projects that the recommended tax reforms could generate additional revenue equivalent to 3.9 percent of Nigeria’s Gross Domestic Product (GDP) within three years.
Among the proposed measures, a two-percentage-point increase in the VAT rate is expected to contribute the largest share, generating approximately 0.8 percent of GDP in additional revenue.
Other proposed reforms include the removal of pioneer status incentives, revisions to free zone regulations, adjustments to capital gains taxation, personal income tax reforms, and the introduction of top-up taxes for multinational corporations and large businesses.
The IMF also identified telecom excise duties and environmental levies, including potential carbon taxes on fuel products, as additional sources of revenue that could support Nigeria’s fiscal sustainability goals.
The recommendations come as the government continues efforts to strengthen public finances, diversify revenue sources, and reduce dependence on oil earnings amid ongoing economic reforms.
