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| IMF headquarters Washington DC urging Nigerian tax reform |
The International Monetary Fund asked Nigeria to boost tax revenue by widening the tax base and fighting evasion. Kristalina Georgieva spoke at the IMF’s 2025 Global Policy Agenda press briefing. She said tech can help track incomes and close gaps. She warned against excuses and urged swift action from Abuja.
Nigeria’s tax take is among the lowest in Africa. The ratio of tax to GDP hovers below regional peers. This forces heavier borrowing and strains public services. The IMF says many Nigerians still operate outside formal tax systems. Stronger outreach and digital tools can widen coverage.
An IMF team led by Axel Schimmelpfennig visited Lagos and Abuja from April 2–15. The mission praised subsidy cuts and forex market reforms. It urged a neutral fiscal stance to support inflation control. Officials met finance and central bank leaders, civil groups, and private sector reps. Staff noted Nigeria’s buffers remain weak amid global risks.
Georgieva highlighted tech’s role in cracking down on evaders. She pointed to e-invoices and data analytics as key tools. These systems have improved indirect tax collection elsewhere. Nigeria can adapt similar platforms to track business transactions in real time. This can cut manual errors and limit fraud.
The IMF chief warned that evasion erodes trust in government. She urged tougher audits and clearer penalties. She noted bridging tax gaps can free funds for health and education. A mix of incentives and enforcement can boost compliance. Transparency in revenue use also builds public support.
The 2025 budget plans to spend 4.5% more than earnings, IMF reports. This gap demands higher revenue or more debt. Fuel subsidy removal freed some funds but widened the fiscal hole. The IMF urges channeling savings into growth investments and social programs. This ensures vulnerable groups gain from reforms.
Despite revenue gaps, Nigeria posted a $6.83 billion balance of payments surplus in 2024. Strong trade and rising remittances supported this outcome. Remittances climbed 8.9%, reaching $20.93 billion last year. However, a trade surplus alone won’t fix fiscal shortfalls. Tax revenue must rise alongside external inflows.
Slowing global growth and tariff shifts strain budgets worldwide. The IMF forecasts average deficits of 5.1% of GDP in 2025. Nigeria’s debt costs may rise if growth lags. The Fund warns that unchecked deficits threaten macro stability. Stronger revenue collection can offset external shocks and debt burdens.
Past attempts to raise VAT or cut subsidies sparked protests in Kenya and Nigeria. Lawmakers face pressure from citizens wary of higher costs. Northern governors balk at some revenue-sharing moves. Parliament passed tax reform bills with tweaks on VAT rates and exemptions. Final approval and presidential assent remain critical next steps.
Economists say phasing reforms eases public pain. Linking tax hikes to service improvements wins support. Digital invoicing in Uruguay and Australia’s pension boosts show success. Nigeria can pilot reforms in select sectors before broad rollouts. Clear communication and phased targets help anchor expectations.
Nigeria must embrace fiscal and tech reforms to raise revenue. The window is narrow with oil price swings and global risks. Broader tax coverage and tougher audits can build buffers. Strong civic engagement and clear spending plans will aid acceptance. Time is short. Nigeria needs decisive action now.