The IMF has just told Nigeria that its tax reform, the most sweeping in a generation, is not enough. And the two sectors it has identified as untapped revenue sources are precisely the ones Nigerians can least afford to see taxed further.
The IMF's 2026 Article IV Consultation report on Nigeria has recommended further tax policy changes, stating: "Further tax policy changes will likely be needed, such as increasing the VAT rate, extending VAT to fuel products, rationalising tax expenditures in particular VAT exemptions on extractive industries and some customs duties, and introducing telecom excises to complement administrative gains."
The revenue argument behind the prescription is straightforward. The IMF said continued revenue mobilisation is essential because there is limited room to maintain the federal government's planned increase in capital expenditure without additional sources of income, adding: "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." Taken together, the new taxes along with improved tax compliance were projected to raise revenue by 3.9% of GDP over the medium term.
The Fund was careful to acknowledge the contradiction embedded in its own recommendation. The IMF cautioned that the timing of any new taxes must take into account Nigeria's rising poverty levels and worsening food insecurity, a caveat that does little to soften the political and social difficulty of taxing fuel in a country where petrol already costs ₦1,532.93 per litre, or taxing telecoms where subscribers just absorbed a 50% tariff hike less than 18 months ago.
The IMF acknowledged that some of Nigeria's recently enacted tax reforms would reduce government revenue in the short term because they were designed to support households and small businesses, estimating that revenue-reducing measures would lower revenues by 2.4% of GDP, with expanded VAT input credits, additional zero-rated items, and broader exemptions on basic consumption goods accounting for 1.7 percentage points of the decline.
Industry resistance is already predictable. The Association of Licensed Telecom Operators of Nigeria (ALTON) noted that companies were already struggling with more than 39 different taxes, a 7.5% VAT, and a mandatory 2% contribution of annual revenue to the NCC. A previous attempt to impose a 5% excise duty on telecom services was met with fierce resistance from network operators, subscribers, and consumer groups before the government quietly dropped it.
The Fund stressed the necessity of a well-functioning cash transfer system before the introduction of any new consumption-based taxes, a sequencing condition that Nigeria's current social protection infrastructure is not yet positioned to meet at the scale required.
The IMF's medicine is logical in fiscal terms. In political and social terms, asking Nigerians, 63% of whom live below the national poverty line, to pay more for fuel and phone calls is a prescription that will require considerably more than economic analysis to administer.
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