Group Faults IMF Tax Plan, Cites Inflation Risks

The Alliance for Economic Research and Ethics Ltd/GTE has rejected the International Monetary Fund’s (IMF) recommendation for new taxes on telecommunications services and fuel products, warning that such measures could deepen inflationary pressures and worsen the cost-of-living crisis facing millions of Nigerians.

The economic policy think tank said the IMF’s proposals, contained in its 2026 Article IV Consultation Report on Nigeria, risk placing additional financial burdens on households and businesses already grappling with rising prices, weak purchasing power and persistent economic uncertainty.

The organisation argued that while Nigeria faces genuine revenue mobilisation challenges, increasing taxes on essential services such as telecommunications and fuel could have unintended consequences for economic growth and social welfare.

The group maintained that the country should focus on improving tax administration, broadening the tax base and enhancing efficiency in public spending rather than imposing additional taxes on consumers.

“The International Monetary Fund has once again reached into its well-worn bag of fiscal tricks and pulled out the same tired prescription for Nigeria: tax fuel, tax telecom, tax everything that moves, breathes, or connects,” the organisation said.

It described the IMF’s recommendations as a familiar policy approach that, in its view, has often failed to adequately account for the social realities of developing economies.

“The Alliance for Economic Research and Ethics Ltd/GTE has read this script before. We have seen this movie. And like a Nollywood sequel that refuses to end, the plot remains tragically predictable: the poor get poorer, the middle class evaporates, and the bureaucrats in Washington pat themselves on the back for fiscal discipline,” the statement added.

The response follows the IMF’s recommendation that Nigeria introduce excise duties on telecommunications services and extend Value Added Tax (VAT) coverage to fuel products as part of broader fiscal reforms aimed at boosting government revenues and creating additional fiscal space for development spending.

According to the IMF, Nigeria will require further tax policy measures over the medium term to complement ongoing administrative reforms and improve the country’s revenue performance.

“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,” the Fund stated in its report.

The IMF estimates that the proposed tax measures could generate additional revenues equivalent to 3.9 per cent of Gross Domestic Product (GDP) within three years, while improvements in tax administration could contribute another 3.1 per cent of GDP.

However, the Alliance questioned the economic wisdom of implementing such measures at a time when inflation remains elevated and households continue to struggle with higher living costs.

The organisation described the recommendations as a potentially “lethal prescription” for an economy already facing multiple pressures, including high inflation, currency volatility, weak consumer demand and declining real incomes.

According to the group, Nigeria’s tax-to-GDP ratio remains one of the lowest in Africa despite modest improvements in recent years. Data cited by the organisation showed that the ratio increased slightly from 7.9 per cent in 2022 to 8.2 per cent in 2023, still significantly below the African average of 16.1 per cent.

While acknowledging the need to improve government revenues, the think tank argued that policy reforms must be carefully calibrated to avoid undermining economic activity or worsening social conditions.

Analysts note that telecommunications services and fuel products play critical roles across the Nigerian economy, influencing transportation costs, business operations, digital connectivity and household expenditures. Any increase in taxes affecting these sectors could have ripple effects across multiple industries and consumer segments.

The debate highlights the broader challenge facing policymakers as they seek to balance fiscal sustainability with economic growth and social protection objectives.

Nigeria has come under increasing pressure to expand domestic revenue generation amid rising public debt obligations, infrastructure financing needs and growing demands for social investments. At the same time, concerns persist about the impact of additional taxes on businesses and consumers already contending with economic headwinds.

The Alliance urged policymakers to explore alternative strategies for improving public finances, including strengthening revenue collection mechanisms, reducing leakages, enhancing transparency and ensuring greater efficiency in public expenditure.

The group maintained that Nigeria’s fiscal challenges cannot be resolved solely through higher taxes, particularly at a time when citizens and businesses are facing significant economic strain.

As discussions around the IMF recommendations continue, the debate is expected to shape broader conversations on tax reform, fiscal sustainability and economic recovery in Africa’s largest economy.