By Mark Itsibor, Abuja and Bukola Aro-Lambo, Lagos
Economists have urged the Federal Government to disregard the International Monetary Fund’s (IMF) recent recommendation to impose taxes on fuel and telecommunications services, warning that such measures would worsen inflationary pressures, further erode household incomes and deepen economic hardship for Nigerians.
The economists, who strongly rejected the IMF’s proposal, described it as “overkill”, arguing that households already burdened by rising electricity tariffs, telecommunications costs and inflation cannot absorb additional taxes.
The IMF had advised the Nigerian government to consider extending Value Added Tax (VAT) to fuel products and introducing excise duties on telecommunications services as part of efforts to boost revenue generation and create fiscal space for development spending.
In its 2026 Article IV Consultation Report on Nigeria, the IMF warned that despite recent tax reforms, additional revenue measures would likely be required over the medium term to support critical social and infrastructure spending.
According to the Fund, Nigeria’s revenue mobilisation efforts must go beyond administrative improvements to address the country’s persistently low revenue-to-GDP ratio and rising expenditure pressures.
The IMF stated: “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.”
It noted that while recently enacted tax reforms are expected to improve revenue collection over time, some measures could reduce revenue in the short term and may take time to yield significant gains.
The IMF stressed that sustained revenue mobilisation is essential if the government is to maintain higher capital expenditure and expand social intervention programmes aimed at cushioning the impact of economic reforms on vulnerable Nigerians.
“Over the medium term, continued revenue mobilisation is essential to creating fiscal space for development and social spending,” the Fund said, adding that there was limited scope to sustain projected increases in capital expenditure without additional revenue sources.
However, the Bretton Woods institution cautioned that the timing of any new tax measures should take account of worsening poverty and food insecurity in the country.
It emphasised that any tax increases should be accompanied by a fully funded and effective cash transfer programme to shield vulnerable households from additional economic hardship.
“The timing of reforms must consider the poverty and food insecurity situation and ensure that the cash transfer system is in place and funded,” the report stated.
The IMF’s recommendation comes as Nigeria continues to grapple with weak revenue generation despite recent reforms, including the removal of fuel subsidies and efforts to improve tax administration.
The Fund projected that poverty and food insecurity could worsen amid higher global fuel and food prices, noting that poverty had already affected 63 per cent of the population, while about 27 million Nigerians faced food insecurity in 2025.
It also reiterated its call for a neutral fiscal stance in 2026, warning that spending pressures linked to poverty, food insecurity and preparations for the 2027 general elections could widen fiscal deficits and increase financing needs if not carefully managed.
Reacting to the recommendation, Professor of Economics at the University of Benin, Hassan Oaikhenan, cautioned the Federal Government against implementing the IMF’s proposals to increase VAT and introduce excise duties on telecommunications services.
He described the recommendations as “overkill” and warned that they could worsen the economic burden on Nigerians already struggling with rising living costs.
“Nigerians are already overstressed,” he said. “The government is already generating substantial revenues, and adding more taxes through higher VAT and excise duties on telecommunications would be an overkill.”
The economist noted that recent increases in electricity tariffs and telecommunications charges had placed additional pressure on household incomes, warning that further taxes could deepen economic hardship.
