The International Monetary Fund (IMF) has urged Nigeria to broaden its tax base by introducing excise duties on telecommunications services and extending Value Added Tax (VAT) to fuel products, arguing that such measures could significantly improve government revenue and strengthen the country’s fiscal position.
The recommendation comes as Africa’s largest economy continues to grapple with revenue challenges despite a series of economic reforms aimed at reducing fiscal deficits and improving public finances. Nigeria’s tax-to-GDP ratio remains among the lowest globally, limiting the government’s capacity to finance critical infrastructure, healthcare, education, and social welfare programmes.
According to the IMF, expanding the scope of indirect taxes would help Nigeria generate more stable and predictable revenue streams while reducing its dependence on oil-related income. The Fund noted that telecommunications services represent a rapidly growing segment of the economy and remain relatively underutilized as a source of government revenue.
An excise duty is a tax imposed on specific goods or services, often applied at the point of consumption. The IMF believes that introducing such a levy on telecom services could provide the government with an additional source of non-oil revenue without requiring significant structural adjustments to the tax system.
The institution also recommended extending VAT to fuel products. Nigeria has already implemented major fuel sector reforms, including the removal of petrol subsidies, which have significantly altered market dynamics and pricing structures. Applying VAT to fuel sales would further align Nigeria’s tax framework with international practices and broaden the country’s consumption tax base.
However, the proposals could generate debate among consumers, businesses, and industry stakeholders. Telecommunications operators have repeatedly warned that additional taxes could increase operating costs and ultimately raise service prices for millions of subscribers. Similarly, applying VAT to fuel products may contribute to higher transportation and logistics costs, potentially exerting upward pressure on inflation.
Economic analysts say the IMF’s recommendations highlight the delicate balancing act facing policymakers. While expanding the tax base is critical for improving fiscal sustainability, authorities must also consider the impact of higher taxes on households and businesses already coping with elevated living costs.
The recommendations form part of broader efforts to strengthen domestic revenue mobilization, improve public finance management, and reduce fiscal vulnerabilities. As Nigeria seeks to attract investment and maintain macroeconomic stability, the debate over tax reform is likely to remain a central feature of economic policy discussions in the months ahead.
