Can Nigeria hit revenue targets without asking taxpayers for more?

Nigeria’s decision to reject International Monetary Fund (IMF) proposals for new taxes on telecommunications services and fuel products has intensified debate over whether the country’s ongoing tax reforms can generate enough revenue to meet growing fiscal demands without imposing additional burdens on businesses and households.

The debate goes beyond whether telecoms or fuel should be taxed. It strikes at the heart of Nigeria’s fiscal challenge: how Africa’s largest economy intends to fund infrastructure, education, healthcare, and security while maintaining one of the world’s lowest revenue-to-GDP ratios.

“The short answer is no, not entirely,” said Faith Iyoha, economist at the Nigerian Economic Summit Group (NESG), when asked whether recent reforms alone can solve Nigeria’s revenue problem.

“The fuel subsidy removal, exchange-rate harmonisation, and electricity tariff reforms are necessary reforms that improve fiscal sustainability and economic efficiency. However, they are not sufficient on their own to solve Nigeria’s revenue problem. They create fiscal space and reduce leakages, but they do not fundamentally address the country’s weak revenue mobilisation capacity.” Iyoha said

The IMF’s latest Article IV Consultation report argued that Nigeria may need additional revenue measures, including telecom excise duties and extending VAT to fuel products, as part of a broader package capable of generating up to 3.9 percent of GDP in additional revenue over the medium term.

The recommendation reflects a longstanding concern about Nigeria’s ability to generate sufficient public revenue. According to the OECD’s Revenue Statistics in Africa report, Nigeria’s tax-to-GDP ratio stood at just 8.2 percent in 2023, roughly half Africa’s average of 16.1 percent and among the lowest on the continent.

Although President Bola Tinubu recently said reforms had raised the ratio to 13.5 percent as of September 2025, the government’s own target is to increase revenue collection to 18 percent of GDP by 2030 under the newly enacted tax laws.

At the same time, pressure on public finances remains intense. According to data from the Debt Management Office (DMO), Nigeria’s total debt service rose to N15.81 trillion in 2025, a 23.2 percent increase from N12.83 trillion in 2024, driven largely by a 46.7 percent surge in domestic interest payments, which climbed from N5.87 trillion to N8.61 trillion.

Yet many economists argue that the government’s rejection of new telecom and fuel taxes is justified given current economic conditions.

“On balance, Nigeria is right to reject IMF calls for additional telecom and fuel taxes,” Iyoha said.

“The timing matters. Nigeria has already imposed significant adjustment costs on households and businesses through the recent reforms, and adding new telecom taxes or fuel taxes at this stage could stoke inflation, exacerbate the cost-of-living crisis, raise business costs, reduce digital inclusion, and slow economic recovery.”

The telecommunications sector has become increasingly important to economic activity, making it particularly sensitive to additional taxation.

According to the National Bureau of Statistics, the sector accounted for 8.3 percent of real GDP in 2025 under the rebased GDP framework, up from 8.1 percent a year earlier, the sector’s contribution rose further to 9.19 percent of GDP in the first quarter of 2026, making it one of the fastest-growing segments of the economy.

For Opeyemi Ajetunmobi, a structured finance and capital markets professional, the issue is not whether Nigeria needs more revenue but where that revenue should come from.

“Higher telecom costs increase the cost of mobile money transactions. Mobile money is how tens of millions of unbanked Nigerians move money daily,” he said.

“Higher fuel costs increase logistics costs. Logistics costs are embedded in every supply chain in Nigeria. The SME distributor delivering goods to markets in Onitsha, Kano, and Port Harcourt absorbs every naira of that increase before it reaches the consumer.”

According to him, taxing fuel and telecommunications would amount to taxing critical economic infrastructure rather than luxury consumption.

The government’s position is that higher revenues can be achieved through improved tax administration, digitalisation and broader compliance rather than new taxes.

That argument appears to have some support in recent collection figures. The Nigeria Revenue Service (NRS) generated a record N28.3 trillion in 2025, exceeding its target of N25.2 trillion and representing a 30 percent increase over the N21.7 trillion collected in 2024.

Momentum has continued into 2026. Tax collections reached N15.8 trillion in the first five months of the year, representing a 49 percent increase compared with N10.6 trillion recorded during the corresponding period of 2025.

The challenge, however, is whether those gains can be sustained long enough to close Nigeria’s revenue gap.

Experts point to a number of areas where additional revenue could be generated without increasing tax rates. These include expanding the tax net, improving compliance through e-invoicing and digital tax administration, reducing leakages, formalising more businesses and reviewing tax expenditures and exemptions.

Nigeria’s informal economy remains one of the largest in Africa, with millions of businesses operating outside the formal tax system.

“The real policy question is not whether Nigeria can collect more taxes,” Iyoha said. “It is whether Nigeria can generate enough productive economic activity to expand the tax base sustainably.”

Others argue that the government must also address inefficiencies on the expenditure side.

“The IMF is correct that Nigeria collects too little,” said Adegbola Thomas, a finance and tax transformation professional.

“Consolidated government revenue sits around 10 percent of GDP while debt service consumes more than half of federal revenue. That is a genuine fiscal problem.”

However, he argues that introducing new consumption taxes at a time of elevated fuel prices and weakened household purchasing power would amount to “inverted sequencing.”

“The right sequence is to cut the cost of governance, close leakages, address inefficiencies and improve expenditure quality before asking households and businesses to shoulder additional tax burdens,” he said.

For Nigeria, the disagreement with the IMF ultimately reflects two competing approaches to fiscal reform. The Fund believes additional revenue measures may be necessary to accelerate fiscal consolidation. The government believes revenue targets can be achieved through better collection, broader compliance, and stronger economic growth.

Whether that strategy is sufficient may determine if Nigeria can achieve its goal of raising revenue to 18 percent of GDP by 2030 without returning to the politically difficult question of new taxes.