Alliance Urges FG to Reject IMF Tax Proposals, Offers 7-Point Recovery Plan

The Alliance for Economic Research and Ethics (AERE) has urged the Nigerian Federal Government to reject recent tax proposals from the International Monetary Fund (IMF), which include new excise duties on telecommunications services and extending Value Added Tax (VAT) to fuel products. AERE warns that these measures could exacerbate inflationary pressures and worsen the cost-of-living crisis for Nigerians. Instead, the policy think tank has put forward a seven-point recovery plan, advocating for improved tax administration, rationalisation of tax expenditures, reduction in governance costs, and expansion of social protection programmes as more sustainable routes to fiscal stability and economic growth. This intervention highlights a critical divergence in approaches to Nigeria's revenue mobilisation challenges amidst ongoing comprehensive tax reforms.

Nigeria is currently navigating a complex economic landscape characterised by persistent inflationary pressures, a high cost of living, and an urgent need for enhanced revenue mobilisation. In this context, the International Monetary Fund (IMF) recently presented its 2026 Article IV Consultation Report on Nigeria, which included recommendations for new tax measures such as excise duties on telecommunications services and the extension of Value Added Tax (VAT) coverage to fuel products. These proposals are aimed at boosting government revenues and creating additional fiscal space for development spending.

However, a prominent policy think tank, the Alliance for Economic Research and Ethics (AERE), has strongly advised the Federal Government to reject these IMF recommendations. AERE argues that such measures would be regressive, deepen inflationary pressures, and further burden citizens and businesses already grappling with economic hardships. Instead, AERE has proposed a comprehensive seven-point recovery plan, focusing on internal administrative efficiencies and targeted interventions rather than new consumption taxes. This article will delve into the legal and policy implications of these contrasting approaches, examining Nigeria's existing tax framework, ongoing reform efforts, and the potential impact of adopting either the IMF's proposals or AERE's alternative strategy.

Nigeria's fiscal challenges are well-documented, with a historically low tax-to-GDP ratio, which stood at 8.2% in 2023, significantly below the African average of 16.1%. This has led to an over-reliance on borrowing to finance public spending, limiting fiscal space and hindering socio-economic development. The International Monetary Fund, as a global financial institution, regularly engages with member countries like Nigeria, providing economic surveillance and policy advice, often including recommendations for fiscal consolidation and revenue enhancement.

Nigeria's tax system has undergone several reforms in recent years, with key legislation including the Companies Income Tax Act (CITA), the Value Added Tax Act (VAT Act), and the Customs and Excise Management Act (CEMA). The Finance Act 2023, for instance, introduced significant amendments to these and other tax statutes, aiming to widen the tax net and minimise avoidance loopholes. More recently, the Nigerian government, under President Bola Tinubu, established the Presidential Committee on Fiscal Policy and Tax Reforms in July 2023, with a mandate to review and redesign the fiscal system. This committee aims to achieve a minimum 18% tax-to-GDP ratio by 2026, streamline taxes, and modernise tax administration. A significant development is the Nigeria Tax Act 2025 and the Tax Administration Act 2025, which came into effect on January 1, 2026, consolidating major tax legislation and introducing sweeping changes to the tax framework.

The IMF's latest recommendations for Nigeria, outlined in its 2026 Article IV Consultation Report, primarily advocate for the introduction of excise duties on telecommunications services and the extension of Value Added Tax (VAT) coverage to fuel products. The Fund also suggested increasing the general VAT rate, currently at 7.5%, and rationalising tax expenditures, particularly VAT exemptions on extractive industries and certain customs duties. The underlying rationale for these proposals is to bolster government revenues, which the IMF estimates could generate an additional 3.9% of Gross Domestic Product (GDP) within three years, complementing administrative improvements.

However, the Alliance for Economic Research and Ethics (AERE) has vehemently opposed these suggestions, characterising them as a "lethal prescription" for an economy already struggling with high inflation, currency volatility, and weak consumer demand. AERE argues that imposing new taxes on essential services like telecommunications and fuel would disproportionately affect ordinary citizens, deepen inflationary pressures, and stifle economic recovery. The think tank contends that Nigeria's primary challenge lies in weak tax administration, revenue leakages, and high production costs, rather than insufficient taxation. Notably, AERE points out that the IMF itself acknowledged that improved tax administration could generate revenues equivalent to about 3.1% of GDP without introducing new taxes.

In response, AERE has proposed a seven-point recovery plan, which includes rejecting new taxes on fuel and telecommunications in 2026, focusing on improving tax administration and compliance, and rationalising tax expenditures currently enjoyed by extractive industries and large corporations. The plan also calls for reducing the cost of governance, lowering interest rates to support productive enterprises, expanding social protection programmes, and tackling revenue leakages with greater urgency. This alternative framework aligns with some of the broader objectives of the Presidential Committee on Fiscal Policy and Tax Reforms, which is working to streamline the tax system and modernise administration. The recently enacted Nigeria Tax Act 2025, for instance, already introduces measures such as a 15% minimum effective tax rate for large multinationals, revised Personal Income Tax rates, and expanded VAT exemptions for essential items, indicating a governmental focus on administrative efficiency and protecting vulnerable groups, which resonates with AERE's stance.

The legal implications of adopting new tax measures, whether proposed by the IMF or AERE, would necessitate legislative action. Amendments to tax laws, such as those governing VAT, excise duties, and corporate income tax, typically require the enactment of Finance Acts or, as seen with the consolidation, a comprehensive tax act like the Nigeria Tax Act 2025. While IMF recommendations are advisory, the Nigerian government's decision will reflect a delicate balance between external economic advice, domestic socio-economic realities, and the political will to implement reforms that are both effective and equitable.

The ongoing debate between the IMF's tax proposals and AERE's alternative recovery plan underscores the critical juncture at which Nigeria's fiscal policy stands. While the need for increased revenue generation is undeniable, the method of achieving this remains a contentious issue, with significant implications for economic stability and citizen welfare. The government's commitment to comprehensive tax reforms, as evidenced by the establishment of the Presidential Committee on Fiscal Policy and Tax Reforms and the enactment of the Nigeria Tax Act 2025, suggests a leaning towards a more holistic and administratively focused approach, rather than solely relying on new consumption taxes.

For legal practitioners, this evolving landscape necessitates close monitoring of legislative and regulatory developments. The implementation of the Nigeria Tax Act 2025, with its consolidation of major tax laws and introduction of new compliance requirements like e-invoicing, will require a thorough understanding to advise clients effectively. Furthermore, any future pronouncements from the Presidential Committee on Fiscal Policy and Tax Reforms, particularly regarding tax expenditures and administrative efficiencies, will shape the operational environment for businesses. Practitioners must be prepared to guide clients through potential shifts in excise duties, VAT application, and corporate tax structures, ensuring compliance while advocating for policies that foster sustainable economic growth and a more equitable tax burden.