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‎When the IMF Proposes and Nigeria Disposes
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‎By Obamodi Oluwadamilola Faith
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‎The Federal Government’s rejection of the International Monetary Fund’s (IMF) recommendation to impose new taxes on petroleum products and telecommunications services has brought welcome relief to millions of Nigerians already grappling with high inflation and a rising cost of living. At a time when households and businesses are still adjusting to the effects of subsidy removal, exchange-rate reforms and persistent economic pressures, the decision reflects an attempt to balance fiscal responsibility with social realities.
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‎The government’s position was announced on June 17, 2026, following the release of the IMF’s 2026 Article IV Consultation Report, which recommended broadening Nigeria’s tax base by extending Value Added Tax (VAT) to Premium Motor Spirit (PMS), introducing excise duties on telecommunications services and reducing tax exemptions to improve government revenue.
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‎Responding through the Ministry of Finance, Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, clarified that the IMF’s recommendations were advisory rather than mandatory and reaffirmed that the administration had no plans to introduce additional taxes on petrol or telecommunications. Instead, the government said it would continue implementing the Tax Reform Acts 2025, which seek to simplify Nigeria’s tax system, improve compliance and stimulate economic growth without imposing undue burdens on low-income households.
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‎The decision is understandable. Petrol and telecommunications have become indispensable to Nigeria’s economy. With electricity supply remaining unreliable, households, hospitals, schools and businesses depend heavily on petrol and diesel-powered generators to sustain daily activities. Any additional tax on fuel would inevitably raise transportation costs, production expenses and the prices of essential goods and services, further squeezing consumers whose purchasing power has already been weakened by inflation.
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‎The telecommunications sector is equally critical. Internet access and mobile connectivity now underpin banking, education, journalism, e-commerce, digital entrepreneurship and public service delivery. Additional excise duties on voice calls and data services would not only increase the cost of communication but could also undermine Nigeria’s expanding digital economy and frustrate efforts to promote financial inclusion and innovation.
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‎Yet, rejecting the IMF’s proposal should not obscure the legitimate fiscal concerns that informed it. Nigeria’s tax-to-GDP ratio remains about 10.8 per cent, one of the lowest in Africa and significantly below the continental average of about 15 to 16 per cent. This weak revenue base has constrained government’s ability to invest adequately in infrastructure, healthcare, education and security while increasing dependence on borrowing to finance public expenditure.
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‎The IMF’s recommendations therefore reflect a broader concern about Nigeria’s fiscal sustainability rather than a simplistic desire to increase taxes. As the Fund noted, improving domestic revenue mobilisation is essential if the country is to reduce its fiscal deficit, strengthen macroeconomic stability and finance long-term development. However, the method of achieving that objective is where legitimate differences arise.
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‎Rather than introducing new taxes on already burdened citizens, Nigeria should prioritise reforms that improve the efficiency of existing tax administration. The country’s revenue challenge is not merely a consequence of low tax rates but also of widespread tax evasion, illicit financial flows, multiple taxation, weak compliance and institutional leakages. Billions of naira are lost annually through inefficiencies that could be addressed through stronger enforcement, digital tax administration and greater transparency.
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‎The implementation of the Tax Reform Acts 2025 presents an opportunity to address these structural weaknesses. The reforms seek to harmonise multiple taxes, simplify compliance, expand the formal tax base and reduce the cost of doing business. If properly implemented, they could generate more sustainable revenue without placing disproportionate pressure on ordinary Nigerians and small businesses.
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‎Equally important is the need to strengthen public confidence in the tax system. Citizens are generally more willing to pay taxes when they can see visible improvements in public services. Greater transparency in public expenditure, stricter accountability mechanisms and measurable investments in infrastructure, healthcare, education and security would significantly improve voluntary tax compliance.
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‎The government’s rejection of the IMF’s proposal also highlights an important principle of economic governance. International financial institutions offer valuable technical expertise based on global experience, but their recommendations are not binding policy directives. Every country must adapt such advice to its unique economic conditions. Given Nigeria’s current realities, high inflation, declining household incomes and fragile business confidence, imposing fresh taxes on fuel and telecommunications could have deepened economic hardship and slowed recovery.
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‎Nonetheless, saying “NO” to new taxes cannot become a substitute for comprehensive fiscal reform. Nigeria still faces the difficult task of expanding domestic revenue, reducing debt dependence and financing critical development priorities. Achieving these goals will require sustained implementation of the Tax Reform Acts, broadening the tax base through improved compliance rather than higher rates, formalising more businesses, plugging revenue leakages and ensuring that high-income earners and profitable corporations contribute their fair share.
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‎Ultimately, the Federal Government’s decision has provided much-needed breathing space for citizens at a difficult economic moment. But lasting fiscal stability will not be achieved simply by rejecting external recommendations. It will depend on building a transparent, efficient and equitable tax system that encourages investment, rewards productivity and converts public revenue into tangible improvements in the lives of Nigerians. That, not additional taxes on already stretched households, remains the surest path to sustainable economic growth.
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‎Obamodi Oluwadamilola Faith
‎NYSC Corps Member, Abuja
‎Email: [email protected]