Finance experts have raised alarm bells over the International Monetary Fund's recent push for Nigeria to impose Value Added Tax on fuel products. They argue the timing couldn't be worse for ordinary Nigerians.
The IMF made the recommendation in its 2026 Article IV consultation report released June 9. In the report, it suggested Nigeria might need to extend VAT to petroleum and introduce excise duties on telecoms services.
Washington-based officials said recent tax reforms may not generate enough revenue for government spending plans over the medium term. Experts, however, disagreed with this approach.
Prof. Uvhe Uwaleke of Nasarawa University's Institute of Capital Markets Studies outlined the IMF's specific proposals.
He listed possible VAT increases, VAT extension to fuel, reduced tax exemptions, and new telecoms excise duties.
The professor noted that while boosting revenue sounds sensible in theory, the context here is troubling. Nigeria is battling one of its worst cost-of-living crises ever, he told Daily Trust.
"Households are already struggling with high food prices, transportation costs, energy bills, and housing expenses," Prof. Uwaleke said.
Adding more indirect taxes now would only deepen their pain.
He argued that more taxes would crush consumer spending and worsen household welfare. The government should focus elsewhere instead, he noted.
Tax policy shouldn't be judged solely on revenue generation, Prof. Uwaleke stressed.
It must consider broader social and economic impacts too.
Better tax administration should come first, he added. Widening the tax net, reducing leakages, improving compliance, and growing the economy would naturally expand revenue.
"The good news is the government's ongoing tax reforms already address these issues," according to him. The IMF proposal becomes even more problematic when looked at alongside other government moves.
Nigeria is reportedly seeking a USD5 billion loan from an Abu Dhabi financial institution. The deal allegedly requires collateral valued at 133.3 percent of the loan amount.
Such arrangements raise serious questions about debt sustainability and fiscal prudence, Prof. Uwaleke warned.
Governments do need external financing sometimes, but not at such excessive cost.
Collateralizing deals shouldn't compromise strategic national assets or future fiscal flexibility. The IMF's own concerns about complex financing and transparency become especially relevant here.
"Nigeria must avoid short-term attractive deals that carry massive long-term risks," Prof. Uwaleke cautioned.
Greater transparency on loan terms, collateral, repayment structures, and liabilities is essential now.
Dr. Umar Yakub of the Centre for Fiscal Transparency and Public Integrity also weighed in.
His views echoed concerns about the IMF's ill-timed recommendations.
