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 measures to increase government revenue, support development projects, and fund social programmes.
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 while recent tax reforms are expected to improve revenue generation, they may not be sufficient to sustain the government’s expenditure plans in the medium term.
“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 IMF said.
According to the fund, continued revenue mobilisation is necessary because there is limited capacity to maintain the federal government’s planned increase in capital spending without securing additional income sources.
“Staff’s projections caution that there is limited space to sustain the 2026 ramp up of capital expenditure over the medium-term in the absence of further revenue gains,” the IMF stated.
The organisation added that the implementation of Nigeria’s new tax laws should gradually improve revenue collection, while the deployment of digital systems for tracking, verification and collection could help curb leakages and reduce corruption risks.
The IMF noted that stronger revenues would provide room for more development projects and social interventions but stressed that the timing of any new taxes should take into account the country’s rising poverty levels and food insecurity challenges.
“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 fund acknowledged that despite improvements in macroeconomic stability over the last three years, many Nigerians continue to face difficult living conditions.
It reported that poverty has risen to 63 percent based on the national poverty benchmark, while an estimated 27 million Nigerians experienced food insecurity during the latter part of 2025.
The IMF further warned that increases in global fuel, food and fertiliser prices could worsen living conditions, even though they may boost export earnings and government revenue.
“Higher global fuel, food and fertilizer prices will improve exports and fiscal revenues, but also give rise to inflationary pressures, potentially aggravating poverty and food insecurity,” the institution said.
The proposal is expected to reignite discussions around the cost of living, as applying VAT to petroleum products could increase the prices of petrol and diesel, while telecom excise duties could lead to higher costs for airtime, voice calls and internet subscriptions if service providers transfer the charges to consumers.
The recommendation comes after the Nigerian Communications Commission approved a 50 percent tariff increase in January 2025, which resulted in higher costs for data and airtime services.