Finance and development experts have criticised the International Monetary Fund’s recommendation that Nigeria should consider extending Value Added Tax to petroleum products and introducing excise duties on telecommunications services, warning that such measures could worsen the country’s cost-of-living crisis.
The IMF had, in its 2026 Article IV consultation report on Nigeria, released on June 9, said the Federal Government may need to adopt additional tax policy measures to raise revenue, fund development projects and support social spending.
According to the IMF, such measures could include increasing the VAT rate, extending VAT to fuel products, rationalising tax expenditures, reducing exemptions and introducing excise duties on telecom services.
“Further tax policy changes will likely be needed such as increasing the VAT rate, extending VAT to fuel products, rationalising tax expenditures in particular VAT exemptions on extractive industries and some customs duties, and introducing telecom excises — to complement administrative gains,” the IMF said.
The Fund said continued revenue mobilisation was necessary because there was limited room to sustain the Federal Government’s planned increase in capital expenditure over the medium term without additional sources of income.
“Staff’s projections caution that there is limited space to sustain the 2026 ramp-up of capital expenditure over the medium-term in the absence of further revenue gains,” it added.
The IMF noted that the implementation of Nigeria’s new tax laws should gradually increase revenue collection, while digital tools for tracking, verifying and collecting revenues could reduce leakages and corruption vulnerabilities.
It said higher revenues would create fiscal space for development projects and social spending, but warned that the timing of additional taxes must take into account worsening poverty and food insecurity in the country.
“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 IMF stated.
The Bretton Woods institution acknowledged that despite improvements in macroeconomic stability over the past three years, conditions remain difficult for many Nigerians.
According to the IMF, poverty has reached 63 per cent based on the national poverty line, while about 27 million Nigerians were estimated to have faced food insecurity in the latter part of 2025.
It also warned that higher global fuel, food and fertiliser prices could worsen inflationary pressures and aggravate poverty and food insecurity, even if they improve export earnings and government revenues.
Reacting to the recommendation, the Director of the Institute of Capital Markets Studies, Nasarawa State University, Keffi, Prof. Uche Uwaleke, said the IMF’s proposal was contentious, especially given Nigeria’s current economic realities.
Uwaleke said while the objective of improving revenue mobilisation was understandable, the timing and context of the proposal raised serious concerns.
According to him, Nigerians are already facing one of the most severe cost-of-living crises in recent history, with households struggling with high food prices, transportation costs, energy bills, housing expenses and falling purchasing power.
“Nigeria is currently experiencing one of the most severe cost-of-living crises in recent history. Households are already contending with elevated food prices, transportation costs, energy costs, housing expenses, and declining purchasing power. Increasing indirect taxes under such circumstances would likely exacerbate economic hardship, weaken consumer demand, and further strain household welfare,” he said.
Uwaleke argued that tax policy should not be assessed only from the standpoint of revenue generation, but also in terms of its social and economic consequences.
He said before imposing additional tax burdens, government should focus more on improving tax administration, widening the tax net, reducing leakages, enhancing compliance and stimulating economic growth.
According to him, many of these issues are already being addressed in Nigeria’s ongoing tax reforms.
He also raised concern over reports that the Federal Government was planning to secure a $5 billion loan from an Abu Dhabi financial institution under terms said to require collateral valued at about 133.3 per cent of the loan amount.
Uwaleke warned that such financing arrangements raise questions about debt sustainability, asset security and long-term fiscal prudence.
He said while governments often require external borrowing to bridge fiscal gaps and finance development projects, such borrowing should not come with excessive collateralisation that could compromise strategic national assets or future fiscal flexibility.
“The IMF’s concerns regarding complex financing instruments and fiscal transparency become especially relevant in this context,” he said.
“Nigeria must avoid financing arrangements that may appear attractive in the short term but carry disproportionate long-term risks. Greater transparency regarding loan terms, collateral arrangements, repayment structures, and contingent liabilities is therefore essential.”
Also speaking, the Executive Director of the Centre for Fiscal Transparency and Public Integrity, Dr. Umar Yakubu, said the IMF’s advice appeared focused on raising revenue rather than addressing Nigeria’s social challenges.
Yakubu said Nigeria should be cautious about implementing IMF-backed policies, arguing that similar recommendations in the past had deepened poverty instead of reducing it.
“The IMF has been coming at Nigeria for the past 40 years, and every time they make us implement any policy, all it does is to deepen us into further poverty. So we need to stop listening because our fundamentals are different,” he said.
He argued that the IMF was too focused on revenue generation without sufficient attention to waste reduction, accountability and the weak institutional mechanisms that determine how public funds are used.
According to him, increased revenue has not necessarily translated into a reduction in Nigeria’s multidimensional poverty index.
“They are too focused on raising revenues, not necessarily about reducing wastage, but they don’t understand that our accountability mechanisms are not strong enough to support all the revenue generation, which has not translated to a reduction in the multidimensional poverty index,” he said.
Yakubu said taxation should serve as a tool for inclusion, not merely as an instrument for raising revenue.
“So if they’re saying tax should be a tool for inclusion, that makes sense. But if it’s for revenue generation, it doesn’t really add much to the economy,” he added.
He also claimed that the current administration had implemented many IMF recommendations since assuming office, but poverty had worsened.
“As you can see, since this government came to power, they have been implementing almost all the recommendations of the IMF. And you can see that our poverty has deepened, and the essence of governance is to reduce poverty,” Yakubu said.
The IMF recommendation is expected to reopen debate over Nigeria’s tax policy and the cost of living, especially as extending VAT to petroleum products could increase the prices of petrol and diesel.
Similarly, the introduction of telecom excise duties could raise the cost of airtime, voice calls and internet subscriptions if operators pass the additional tax burden to consumers.
Experts warned that while Nigeria needs to improve revenue mobilisation, any tax reforms must be carefully timed, transparently implemented and designed in a way that does not further burden already struggling households.
The post “Extending VAT To Fuel Will Worsen Hardship” — Experts Fault IMF Tax Advice, Warn Telecom Excise May Raise Cost Of Calls, Data appeared first on TheNigeriaLawyer.
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