The International Monetary Fund (IMF) is pressing Nigeria to impose excise duties on telecom services and extend VAT to fuel products, moves that would heap even more financial pressure on an already struggling population.
The recommendations, contained in the Fund’s latest Article IV Consultation Report on Nigeria, arrive at a particularly delicate moment.
The 50% telecom tariff hike approved by the Nigerian Communications Commission took effect in early 2025, having already drawn fierce condemnation from the Nigeria Labour Congress, whose president described the increase as “insensitive, unjustifiable, and a direct assault on Nigerian workers and the general populace.”
Meanwhile, Nigeria’s headline inflation stood at 34.8% in December 2024, with food inflation surging to 39.84% year-on-year.
Against that backdrop, the IMF’s prescription for more taxation has already sparked fresh debate about whether the government’s fiscal ambitions are running dangerously ahead of the people’s ability to cope.
The Fund’s case is built on a stark arithmetic of insufficiency. Nigeria’s tax revenues, long among the lowest as a share of GDP in sub-Saharan Africa, are simply not keeping pace with the demands of a growing population and a government with mounting development obligations.
According to the IMF, robust implementation of Nigeria’s newly signed tax laws will help but will not be enough.
“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 fund projected that stronger tax administration alone could yield an additional 3.1% of GDP through improved compliance, enforcement, and efforts to reduce informality in the economy, while measures such as telecom excise duties and a carbon tax on fuel could contribute a further 0.4% of GDP in additional revenue.
The IMF warns that without stronger revenue growth, Nigeria’s current pace of capital spending is at risk. The message is blunt: the government cannot build roads, schools, and hospitals on its present income.
Few policy areas in Nigeria are as politically combustible as fuel pricing and telecommunications costs. The suggestion that VAT currently exempt from petrol could be applied to fuel products comes at a time when pump prices remain a source of deep public anxiety following the removal of the long-standing fuel subsidy under President Bola Tinubu.
The telecom excise proposal carries its own loaded history. In 2022, under former President Muhammadu Buhari, a 5% excise duty was introduced on both voice and data services.
Telecom operators immediately pushed back, with the Association of Licensed Telecom Operators of Nigeria warning that companies were already navigating more than 39 different levies, a 7.5% VAT, and a mandatory 2% contribution of annual revenue to the Nigerian Communications Commission.
The industry argued that piling on yet another tax would ultimately be passed down to consumers. In September last year, the federal government quietly scrapped the duty, citing the need to ease cost pressures for millions of subscribers.
Now, barely months after that reversal, the IMF is asking Abuja to consider bringing the excise back, a suggestion that will strike many in the industry as a case of déjà vu.
The Fund cautioned that any new tax policies should be implemented carefully, given the country’s growing poverty levels and food security challenges, stressing the need for adequate social protection measures, including well-funded cash transfer programs, before introducing additional burdens on citizens.
With the ongoing cost-of-living crisis, public discontent is perceptible, including over increased telecom and electricity tariffs; the Fund itself acknowledged in its report a rare moment of candor from an institution sometimes accused of prescribing austerity with insufficient regard for the poor.
The sequencing, the IMF insists, is everything. Tax reform before an effective cash transfer system is in place would risk tipping already vulnerable households over the edge.
The fund also urged Nigeria to deepen its use of digital technology in revenue administration to reduce leakages and fight corruption, arguing that better collection of existing taxes could yield significant gains before new ones are needed.
The Nigerian authorities have implemented major reforms over the past two years, which have improved macroeconomic stability and enhanced resilience by removing costly fuel subsidies, stopping monetary financing of the fiscal deficit, and improving the functioning of the foreign exchange market.
Investor confidence has strengthened, helping Nigeria successfully tap the Eurobond market and leading to a resumption of portfolio inflows. At the same time, poverty and food insecurity have risen.
The macroeconomic numbers are improving; the lived experience of millions is not. For the Tinubu administration, the IMF’s latest report is both a validation of the reform path and a warning that the road ahead requires not just fiscal discipline but political dexterity of the highest order.
Whether Abuja will act on the Fund’s recommendations and in what sequence remains to be seen. But with a general election on the horizon in 2027, the calculus of taxing fuel and phone calls in a country already stretched to its limits will not be decided by economists alone.
WHAT YOU SHOULD KNOW
The IMF wants Nigeria to tax fuel and telecom services to boost government revenue, but the timing couldn’t be worse.
Ordinary Nigerians are already suffocating under 34.8% inflation, a 50% telecom tariff hike, and soaring fuel prices, and a new wave of taxes risks pushing millions deeper into poverty.
Nigeria’s economic indicators may be improving on paper, but for the average citizen on the street, the numbers tell a very different story. More taxes without adequate social protection is not reform; it’s a burden by another name.
