The International Monetary Fund (IMF) has advised the Nigerian government to introduce excise duties on telecommunications services and extend Value Added Tax (VAT) to fuel products as part of broader measures to strengthen its revenue.
The Fund gave the recommendation in its latest Article IV consultation report on Nigeria.
The IMF said Nigeria would need additional tax policy reforms over the medium term to create enough fiscal space for development spending and social interventions, warning that the current pace of capital expenditure may not be sustainable without stronger revenue growth.
The recommendation is coming amidst skyrocketing fuel prices and a recent 50% hike in telecom tariffs.
According to the Fund, robust implementation of Nigeria’s newly signed tax laws should gradually improve revenue collection, but this alone may not be sufficient to meet the country’s fiscal needs.
“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 Fund stated.
The IMF, however, stressed that the timing of such reforms must take into account rising poverty levels and food insecurity across the country.
It advised Nigerian authorities to ensure that an effective and well-funded cash transfer system is in place before rolling out additional tax measures that could worsen cost-of-living pressures.
The Fund also urged Nigeria to deepen the use of digital technology in revenue administration to reduce leakages and curb corruption vulnerabilities. According to the report, leveraging digitalization to track, verify, and collect government revenues could significantly improve tax efficiency.
The IMF noted that it is continuing to support Nigerian authorities on tax administration reforms through technical assistance, including the deployment of a resident advisor on tax administration and customs support from its regional technical assistance center.
