The International Monetary Fund (IMF) has suggested that Nigeria may need additional taxes to fund an expanded cash transfer program for vulnerable populations.
This suggestion is probably informed by findings by the Fund that, despite improved macroeconomic outcomes and robust reforms over the past three years, poverty in Nigeria reached 63 per cent, with an estimated 27 million Nigerians facing food insecurity in the fall of 2025.
“Domestic revenue mobilisation is appropriately focused on administrative gains in 2026, while tax rate increases will likely be needed over the medium-term. Funding for the cash transfers program should be secured to support the most vulnerable”, the Fund noted in the report of its 2026 Article IV Consultation.
In May 2023, the current administration of President Bola Tinubu rolled out welfare programmes to ease the impact of removing oil subsidies. These included a cash transfer scheme providing N50,000 to more than 15 million women and youths, along with a N50 billion presidential conditional grant for traders, food vendors, artisans, and others.
The Article IV Consultation is the report of the review of President Tinubu’s three-year economic program, including the administration’s social welfare initiatives such as the cash transfer program for vulnerable populations.
The Fund’s recommended tax measures follow Nigeria’s 2025 tax regime, which aims to expand the tax base and boost government revenue.
In Q1 2026, Nigeria’s tax revenue collection missed its budget target by N2.24 trillion, as reported by the Nigeria Revenue Service (NRS) last month.
The NRS generated N7.44 trillion in gross revenue in Q1 2026, reaching 76.87 per cent of its N9.68 trillion target, according to Federal Account Allocation Committee (FAAC) documentation.
The performance is significantly weaker compared to Q1 2025, when FIRS generated N6.04 trillion, exceeding its target by N218.02 billion and achieving a 103.74 per cent performance rate.
Cumulative quarterly data indicates that Companies Income Tax (CIT) and related non-oil revenue streams were the weakest performers.
The NRS collected N3.75 trillion from Companies Income Tax, Capital Gains Tax, and Stamp Duties, falling N1.30 trillion short of the N5.05 trillion target, achieving a 74.25 per cent performance rate for corporate taxes. Despite generating N2.24 trillion in Q1 2025 and exceeding its target by N218.35 billion, the category underperformed.
Companies’ income tax from upstream oil activities also weakened in the first quarter of 2026.
The upstream category achieved N349.95 billion, falling short of the N523 billion target by N173.05 billion, representing a 66.91 per cent performance rate.
Despite missing targets, Value Added Tax (VAT) collections remained relatively resilient, accounting for N2.42 trillion in the first quarter of 2026 against a target of N2.49 trillion, resulting in a modest shortfall of N73.71 billion and a performance rate of 97.04 per cent.
VAT collection increased by 17.06 per cent year-on-year, up from N2.06 trillion in the same period of 2025.
Oil-related tax revenue, driven by changes in international energy prices, saw a significant year-on-year increase. Cumulative collections from Petroleum Profits Tax (PPT) and Hydrocarbon Tax grew by 43.66 per cent, rising from N1.13 trillion in the corresponding period of 2025 to N1.62 trillion.
The oil tax category exceeded its prorated first-quarter target of N1.30 trillion by N318.23 billion, achieving an overall performance rate of 124.42 per cent.
Petroleum royalties and other mineral revenues underperformed significantly, with petroleum royalties alone recording a cumulative shortfall of N909.25 billion after generating N1.12 trillion against a target of N2.03 trillion.
The reports also disclosed that mineral royalties and other mineral revenues failed to record any inflow during the quarter despite a combined quarterly target of N24 billion.
Credit: Inside Business
