Nigerians have pushed back against the International Monetary Fund's (IMF) recommendation that the Nigerian government introduce excise duties on telecommunications services and extend value-added tax (VAT) to fuel products, arguing that the telecom sector is already overtaxed.
IMF's Recommendations
The IMF, in its updated Article IV consultation report on Nigeria, stated that the country would need additional tax policy reforms over the medium term to create enough fiscal space for development spending and social interventions. It warned that the current pace of capital expenditure may not be sustainable without stronger revenue growth.
Reactions from Telecom Subscribers
Speaking with The Guardian, the President of the National Association of Telecom Subscribers of Nigeria (NATCOMs), Deolu Ogunbanjo, said the IMF lacks a proper understanding of the sector, which currently faces over 40 different types of taxes. Ogunbanjo noted that the association had earlier rejected a planned five per cent excise duty on telecommunications services and even went to court to secure an injunction against it.
IMF's Caution on Timing
The IMF emphasized that robust implementation of Nigeria's newly signed tax laws should gradually improve revenue collection, but this alone may not be sufficient. It stressed that the timing of such reforms must consider rising poverty levels and food insecurity. The IMF advised Nigerian authorities to ensure an effective and well-funded cash transfer system is in place before rolling out additional tax measures that could worsen cost-of-living pressures.
The international body also urged Nigeria to deepen the use of digital technology in revenue administration to reduce leakages and curb corruption vulnerabilities. According to the report, leveraging digitalization to track, verify, and collect government revenues could significantly improve tax efficiency. The IMF noted that it continues to support Nigerian authorities on tax administration reforms through technical assistance, including a resident advisor on tax administration and customs support from its regional technical assistance centre.
Background on Telecom Tax
The Federal Government had previously announced the scrapping of the five per cent excise duty on telecommunications services to ease cost pressures for subscribers. The excise tax was introduced in 2022 under former President Muhammadu Buhari to raise non-oil revenue, covering both voice and data services. Operators were directed to remit the tax monthly. Officials justified the levy by pointing to Nigeria's widening revenue shortfall and the need to expand the tax net beyond oil earnings.
The Association of Licensed Telecom Operators of Nigeria (ALTON), led by Gbenga Adebayo, opposed the five per cent excise tax, explaining that companies were already struggling with more than 39 different taxes, a 7.5 per cent VAT, and a mandatory two per cent contribution of annual revenue to the Nigerian Communications Commission (Annual Operating Levy). Both ALTON and NATCOMs warned that additional taxes would be passed down to subscribers, widening the digital growth gap and leaving telecom services accessible only to the rich.
CPPE's Perspective
Meanwhile, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, acknowledged the positive assessment of Nigeria's economic reforms by the IMF. He admitted the economy is gradually moving from instability to greater predictability, an important foundation for investment, productivity, and sustainable growth. Sharing the IMF's concern about persistent poverty and food insecurity despite macroeconomic stabilization progress, he said economic reforms should be judged not only by macroeconomic indicators but also by their ability to improve citizens' welfare. He added that the next phase of economic management must focus on converting macroeconomic gains into welfare gains, as the challenge before policymakers is no longer economic stabilization but inclusive prosperity.
