The International Monetary Fund (IMF) has advised Nigeria to consider extending value-added tax (VAT) to fuel products and introducing excise duties on telecommunications services as part of efforts to boost government revenue and support development spending.
In its 2026 Article IV consultation report released on June 9, the IMF said recent tax reforms may not generate enough revenue to sustain the federal government’s spending ambitions in the medium term.
The Washington-based lender recommended additional tax measures, including a possible increase in the VAT rate, the extension of VAT to fuel products, a review of tax exemptions, and the introduction of excise duties on telecom services.
According to the IMF, these measures would complement ongoing efforts to improve tax administration and enhance revenue collection.
“Further tax policy changes will likely be needed,” the IMF stated, noting that higher revenues would help create fiscal space for infrastructure development and social programmes.
The fund warned that the government may struggle to maintain its planned increase in capital expenditure beyond 2026 without generating additional income.
While acknowledging progress from recent economic reforms, the IMF said many Nigerians continue to face severe economic hardship. It estimated that poverty has risen to 63 per cent based on the national poverty line, while around 27 million people experienced food insecurity in the latter part of 2025.
The IMF stressed that any new tax measures should be carefully timed and accompanied by effective social protection programmes.
“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 said.
The institution also cautioned that rising global prices for fuel, food and fertilisers could worsen inflation and increase hardship, even though they may boost export earnings and government revenues.
The recommendations are expected to reignite concerns over the cost of living in Nigeria. Extending VAT to petrol and diesel could lead to higher fuel prices, while telecom excise duties may increase the cost of airtime, calls and internet services if operators transfer the additional costs to consumers.
The debate comes barely a year after the Nigerian Communications Commission approved a 50 per cent increase in telecom tariffs in January 2025, leading to higher costs for voice and data services nationwide.
