IMF Pushes Nigeria to Tax Telecom Services, Fuel as Revenue Pressures Mount

The International Monetary Fund (IMF) has urged Nigeria to introduce excise duties on telecommunications services and extend Value Added Tax (VAT) to fuel products as part of broader efforts to boost government revenue and create fiscal space for development spending.

The recommendation was contained in the IMF’s latest Article IV Consultation Report on Nigeria, which assessed the country’s economic outlook and fiscal sustainability.

According to the Fund, while Nigeria’s recently enacted tax reforms are expected to improve revenue generation over time, additional policy measures may be necessary to meet the government’s growing expenditure needs.

The IMF specifically recommended increasing the VAT rate, extending VAT to petroleum products, rationalising tax exemptions, particularly in the extractive sector, and reintroducing excise duties on telecommunications services.

“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,” the Fund stated.

The recommendation comes amid rising fuel prices and months after telecommunications operators implemented a 50 per cent tariff increase, raising concerns about the potential impact of additional taxes on consumers.

However, the IMF cautioned that any new tax measures should be carefully timed to avoid worsening the economic hardship faced by millions of Nigerians.

The Fund stressed the importance of establishing a robust and adequately funded social protection system, particularly cash transfer programmes, before implementing reforms that could further increase the cost of living.

It also called on the Nigerian government to leverage digital technology to strengthen revenue administration, reduce leakages and combat corruption within tax collection systems.

According to the report, digital tools can improve transparency, enhance compliance and significantly increase revenue efficiency.

The IMF disclosed that it continues to support Nigeria’s tax administration reforms through technical assistance programmes, including the deployment of a resident tax administration adviser and customs reform support through its regional technical assistance centre.

The recommendation revives a debate over telecom taxation that led to widespread opposition from industry stakeholders in recent years.

In 2024, the Federal Government scrapped the five per cent excise duty previously imposed on telecommunications services following concerns about its impact on consumers and the telecommunications industry.

The tax, introduced in 2022 under the administration of former President Muhammadu Buhari, was designed to expand non-oil revenue sources and applied to voice, data and other telecommunications services.
Telecom operators had argued that the sector was already burdened by multiple taxes, levies and regulatory charges, warning that additional taxation would increase operational costs and affect service affordability.

Meanwhile, the IMF acknowledged improvements in Nigeria’s macroeconomic indicators but noted that poverty levels remain high despite ongoing reforms.

The Fund projected that Nigeria’s economy would grow by 4.1 per cent in 2026, building on an estimated four per cent growth recorded in 2025. However, it warned that inflationary pressures, rising transportation costs and food prices continue to pose significant challenges to households and businesses.

Analysts say the IMF’s latest recommendations are likely to spark fresh debate over taxation, economic reforms and the balance between revenue generation and protecting citizens from rising living costs.