Telecom and Fuel Taxes could help Nigeria raise revenue, the IMF says, while urging safeguards for vulnerable households

The International Monetary Fund has urged the Federal Government of Nigeria to consider introducing new taxes on telecommunications services and fuel products as part of broader efforts to increase revenue, strengthen public finances and create additional fiscal space for development spending.

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The recommendation was contained in the IMF’s latest Article IV Consultation Report on Nigeria, which assessed the country’s economic outlook and outlined measures aimed at improving long-term fiscal sustainability.

According to the Fund, Nigeria’s recently enacted tax reforms are expected to improve revenue mobilisation over time. However, it cautioned that the measures may not be sufficient to address the country’s growing expenditure needs.

The IMF said additional reforms would likely be necessary, including the introduction of excise duties on telecommunications services, the extension of Value Added Tax to fuel products and a review of existing tax exemptions and customs duty concessions.

“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, to complement administrative gains,” the Fund stated.

The proposal for Telecom and Fuel Taxes comes amid mounting economic pressures on households and businesses, including rising living costs, elevated fuel prices and higher telecommunications charges following recent tariff adjustments approved for operators.

While advocating additional revenue measures, the IMF acknowledged the potential social impact of such reforms and advised the government to proceed cautiously.

The Fund noted that poverty and food insecurity remain significant concerns and stressed the importance of establishing a well-funded and effective social protection system before implementing policies that could further increase living costs.

According to the report, targeted cash transfer programmes should be strengthened to protect vulnerable households from the effects of fiscal reforms.

The IMF also called for greater use of digital technology in tax administration, arguing that digital tools can improve efficiency, enhance transparency and reduce revenue leakages.

The organisation said technology-driven tax systems would enable government agencies to better track economic activity, verify transactions and improve compliance while reducing opportunities for corruption.

It added that it is already supporting 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 to reintroduce a telecommunications excise duty is likely to reignite debate within the industry.

In September 2025, the Federal Government abolished the five per cent excise duty on telecommunications services that had been introduced under the administration of former President Muhammadu Buhari.

The tax, introduced in 2022, applied to voice and data services and was designed to boost non-oil revenue. Telecommunications operators were required to remit the levy monthly to the government.

However, the policy faced strong resistance from industry stakeholders, who argued that the sector was already burdened by multiple taxes and regulatory obligations.

The Association of Licensed Telecom Operators of Nigeria had previously stated that operators contend with more than 39 separate taxes and levies, in addition to the 7.5 per cent VAT and mandatory annual contributions to the Nigerian Communications Commission.

The IMF’s latest recommendation is expected to fuel ongoing discussions about how Nigeria can increase revenue generation without placing additional strain on households and businesses already grappling with inflation and rising operating costs.

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The debate over Telecom and Fuel Taxes is likely to remain central to conversations on fiscal reform as policymakers seek to balance revenue growth with economic welfare and social stability.