IMF Urges Nigeria to Expand VAT to Fuel, Introduce Telecom Excise Duties
The International Monetary Fund (IMF) has advised Nigeria to consider extending Value Added Tax (VAT) to petroleum products and introducing excise duties on telecommunications services as part of efforts to boost government revenue and support development spending.
The recommendation was contained in the IMF’s 2026 Article IV Consultation Report on Nigeria, released on June 9. The Washington-based institution noted that recent tax reforms may not be sufficient to sustain the government’s spending plans in the medium term.
According to the IMF, additional tax measures such as increasing the VAT rate, extending VAT to fuel products, reducing tax exemptions, particularly those granted to extractive industries, and introducing excise duties on telecom services may be necessary to complement ongoing improvements in tax administration.
The fund explained that continued revenue mobilisation is crucial as there is limited fiscal space to maintain the federal government’s planned increase in capital expenditure without generating additional income.
It added that the implementation of Nigeria’s newly enacted tax laws is expected to gradually improve revenue collection, while the adoption of digital tools for monitoring and collecting taxes could help reduce leakages and corruption.
The IMF said higher revenues would provide more resources for infrastructure development and social welfare programmes. However, it cautioned that any new tax measures should be carefully timed due to the country’s rising poverty and food insecurity levels.
“The timing of reforms must consider the poverty and food insecurity situation and ensure that the cash transfer system is in place and funded,” the report stated.
While acknowledging that recent economic reforms have improved macroeconomic stability and strengthened resilience, the IMF noted that many Nigerians continue to face difficult living conditions.
The report revealed that poverty has risen to 63 per cent based on the national poverty line, while an estimated 27 million Nigerians experienced food insecurity in the latter part of 2025.
The IMF further warned that increases in global fuel, food and fertiliser prices could worsen inflationary pressures and deepen poverty, even though they may boost export earnings and government revenues.
The recommendations are expected to reignite debates over Nigeria’s cost-of-living crisis. Extending VAT to petroleum products could increase the prices of petrol and diesel, while excise duties on telecommunications services may raise the cost of airtime, voice calls and internet subscriptions if operators transfer the additional costs to consumers.
The proposal comes barely a year after the Nigerian Communications Commission approved a 50 per cent increase in telecommunications tariffs, leading to higher costs of data and airtime services across the country.
