Here Is What That Actually Means.

By Elizabeth Temiloluwa Saint-Wonder | Macro-Econometrician & Quantitative Researcher

The International Monetary Fund (IMF) has advised the Nigerian government to introduce a new excise tax on telecommunications services and extend Value Added Tax (VAT) to fuel products. Predictably, Nigerians pushed back. But before we reduce this to another episode of "IMF versus the people," let us slow down and understand what is actually being proposed, why it is being proposed, and who would truly feel the weight of it.

What Is the IMF Actually Saying?

In simple terms, the IMF is saying Nigeria does not collect enough taxes to pay for the things a functioning government needs to fund, things like roads, schools, hospitals, and social safety nets. The IMF's Article IV Consultation Report (think of it as an annual economic check-up that the IMF conducts on member countries) notes that Nigeria's revenue base remains too narrow and too dependent on oil. To fix this, the IMF is recommending that Nigeria broaden where it collects taxes, starting with two sectors: telecoms and fuel.

Excise duties on telecoms would mean a percentage charge added to your airtime, data bundles, and mobile subscriptions. Extending VAT to fuel means that when you buy petrol at a filling station, a tax would be added to the pump price, just as VAT currently applies to most goods and services you buy. These are not new ideas globally,many countries do both. The question is not whether they are legitimate policy tools, it is whether Nigeria, right now, can afford to implement them without pushing more people to the economic edge.

Why the IMF Has a Point

Nigeria's tax-to-GDP ratio, which measures how much of the economy's total output the government collects in tax, sits embarrassingly low compared to peer economies in sub-Saharan Africa. You cannot fund a modern state on oil revenue alone, especially when oil prices are volatile and production is declining. The IMF is pointing to a structural problem that Nigerian economists have flagged for years: the government does not have enough money to invest in the things that would make life better for ordinary Nigerians. From that angle, the advice is not wrong.

The IMF also went further than just the headline. It explicitly warned that any new taxes must come after an effective cash transfer system is put in place for vulnerable households. It also recommended that Nigeria invest in using digital tools to track and collect the taxes it already has on the books, rather than immediately piling on new levies. That is a more nuanced position than the headlines suggest.

Why Nigerians Are Right to Resist

The telecom sector alone currently faces over 39 different taxes and levies, on top of a 7.5 percent VAT and a mandatory 2 percent Annual Operating Levy paid to the Nigerian Communications Commission. Adding an excise duty on top of that stack would not just hurt telecom companies, it would hurt every subscriber, and that tax burden would roll downhill. Ordinary Nigerians buy the data, ordinary Nigerians pay the airtime. When companies face higher costs, they raise prices. Therefore, the tax effectively becomes a daily tax on communication, business, job searching,  banking, and learning.

The same logic applies to fuel. Nigeria removed its fuel subsidy not long ago, a painful but economically necessary decision that already pushed pump prices to levels that made transport, food logistics, and business operations significantly more expensive. Layering VAT on top of an already deregulated fuel price risks compounding that pain, especially for people in areas where public transport is the only option. The concern from consumer groups is not merely sentimental, it is economically grounded.

The Real Problem Nobody Wants to Say Loudly

Nigeria's fiscal problem is not primarily a tax rate problem, it is a tax collection problem. A significant portion of economic activity happens outside the formal tax net. There are businesses that operate without registration, professionals who earn without filing, and transactions that leave no digital trail. The IMF actually touched on this, urging Nigeria to use digital technology to reduce revenue leakages and close corruption gaps. That is where the real money is. Chasing more taxes from already-taxed sectors, while the informal economy operates freely, is choosing the path of least political resistance, not the path of most economic sense.

So What Should Actually Happen?

The sequencing matters enormously here. Fiscal reform done in the wrong order causes lasting economic damage. The IMF's own advice says: fix the cash transfer system first, deploy digital tax tracking second, and only then consider broadening the tax base. Nigeria should take the IMF's conditions as seriously as its recommendations. A tax reform that hits the poor before a safety net is in place is not a reform. It is a transfer of pain.

Dr Muda Yusuf of the Centre for the Promotion of Private Enterprise captured it well when he noted that the challenge facing Nigeria is no longer macroeconomic stabilisation. The hard part now is converting economic gains at the macro level into real improvements in people's daily lives. More taxes, layered on struggling households, without matching social protection, will not achieve that. What Nigeria needs is not more taxation of the already visible, it needs smarter capture of the invisible.

Bottom line: The IMF is not wrong about Nigeria's revenue problem, but the solution cannot be to tax the most accessible rather than the most capable. Timing, sequencing, and social protection are not footnotes. They are the policy.

About the Author

​Elizabeth Temiloluwa Saint-Wonder is a Macro-Econometrician and Quantitative Researcher holding a Master’s Degree in Financial Econometrics. She specializes in economic forecasting, financial modeling, economic impact analysis, and policy development strategies.