Cost of living set to rise as IMF calls for new taxes in Nigeria

The International Monetary Fund (IMF) has advised the Nigerian government to introduce new taxes on telecommunications services and fuel products as part of efforts to increase government revenue.

The recommendation was contained in the IMF’s latest Article IV Consultation Report on Nigeria. According to the Fund, Nigeria needs to generate more revenue in order to create enough financial resources for infrastructure projects, social welfare programmes, and other development needs.

The IMF noted that while Nigeria’s recently approved tax reforms are expected to improve revenue collection, more measures may still be necessary in the coming years.

Among its recommendations, the IMF suggested that the government should:
Introduce excise duties on telecommunications services such as voice calls and data usage.

Extend Value Added Tax (VAT) to fuel products.
Increase the VAT rate in the future if necessary.

Review and reduce certain tax exemptions currently enjoyed by some sectors.
Strengthen tax administration through digital technology to reduce leakages and improve efficiency.

The Fund stressed that any new taxes should be introduced carefully because many Nigerians are already facing economic hardship. Rising food prices, transportation costs, and inflation have increased the cost of living, making life difficult for many households.

For this reason, the IMF urged the government to establish an effective and well-funded cash transfer programme before introducing additional taxes. According to the organisation, this would help protect vulnerable citizens from the impact of higher prices.

The IMF also encouraged Nigeria to make greater use of digital technology in tax collection and revenue management. It said digital systems could help track government revenues more accurately, reduce corruption, and improve compliance among taxpayers.

The organisation revealed that it is already supporting Nigeria through technical assistance programmes focused on tax administration and customs reforms.

Previous Telecom Tax

The recommendation comes less than two years after the Federal Government removed a 5% excise duty on telecommunications services.

The telecom tax was introduced in 2022 during the administration of former President Muhammadu Buhari as part of efforts to increase non-oil revenue. The levy applied to voice and data services and required telecom operators to remit payments to the government every month.

However, the tax faced strong opposition from industry operators and consumer groups.

Telecom companies argued that they were already burdened by numerous taxes and regulatory charges, including the 7.5% VAT and mandatory contributions to the Nigerian Communications Commission (NCC).

The Association of Licensed Telecom Operators of Nigeria (ALTON) had warned that the tax would increase operating costs and eventually be passed on to consumers through higher service charges.

Economic Outlook

Despite ongoing economic challenges, the IMF said Nigeria’s economy recorded an estimated growth rate of 4% in 2025 and is projected to grow by 4.1% in 2026.
However, the organisation also acknowledged that poverty levels remain high.

It warned that rising global prices of fuel, food, and fertiliser could increase inflation and worsen living conditions for low-income households, even though they may boost Nigeria’s export earnings and government revenue.

The IMF believes that stronger revenue generation, combined with effective social support programmes and improved tax administration, will help Nigeria achieve more sustainable economic growth while maintaining fiscal stability.