IMF Pushes Nigeria To Tax Telecoms, Extend VAT To Fuel Products

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 revenue generation.
The Fund made the recommendation in its latest Article IV consultation report on Nigeria.
According to the IMF, Nigeria will require additional tax policy reforms over the medium term to create sufficient fiscal space for development spending and social interventions, warning that the current level of capital expenditure may not be sustainable without stronger revenue growth.
The recommendation comes amid rising fuel prices and a recent 50 per cent hike in telecom tariffs.
The Fund said that while the implementation of Nigeria’s newly signed tax laws should gradually improve revenue collection, it may not be enough to meet 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.
However, the IMF stressed that the timing of such reforms must take into account rising poverty levels and food insecurity across the country.
It also advised Nigerian authorities to ensure that a well-funded cash transfer system is in place before introducing additional tax measures that could worsen cost-of-living pressures.
The Fund further urged Nigeria to deepen the use of digital technology in revenue administration to reduce leakages and corruption vulnerabilities, saying digitalisation would improve tracking, verification and collection of government revenues.
It added that it continues to support Nigerian authorities through technical assistance on tax administration reforms, including deployment of a resident advisor on tax administration and customs support from its regional technical assistance centre.
The report also noted that in September last year, the federal government scrapped the 5 per cent excise duty earlier imposed on telecommunications services to ease cost pressures on consumers.
The 5 per cent telecom excise tax, introduced in 2022 under the Buhari administration, applied to voice and data services, with operators required to remit monthly.
It was introduced to expand non-oil revenue amid widening fiscal deficits but faced strong opposition from telecom operators, who said the sector was already burdened by more than 39 taxes, 7.5 per cent VAT, and a 2 per cent annual contribution to the Nigerian Communications Commission.
The IMF also noted that despite improved macroeconomic conditions, poverty levels in Nigeria remain high.
It added that rising global prices of fuel, food and fertiliser could improve export earnings and fiscal revenues but may also intensify inflation and worsen hardship for vulnerable households.
The Fund estimated that Nigeria’s economy grew by 4 per cent in 2025 and projected growth of 4.1 per cent in 2026 despite inflationary pressures and rising transportation and food costs.