IMF tells Nigeria to deepen reforms as 70.8% of firms cite taxes

The International Monetary Fund (IMF) has urged Nigeria and other major African economies to deepen fiscal, monetary and governance reforms, warning that stronger institutions, improved revenue mobilisation and more efficient public spending are essential to securing sustainable and inclusive economic growth.

The call comes as 70.8 per cent of Nigerian businesses identify high and multiple taxation as their biggest operating constraint, highlighting the gap between the government’s reform ambitions and the challenges still facing the private sector.

The IMF made the recommendation in its latest assessment of reform priorities across the African Union’s largest economies, identifying fiscal reforms as a priority in seven of the eight economies reviewed.

For Nigeria, the Fund called for improvements in tax policy, revenue administration, public financial management and spending efficiency, alongside stronger monetary-policy frameworks and transmission.

It also identified governance reforms as critical, particularly in the areas of fiscal transparency, public financial management and anti-corruption practices.

“Adopting these recommendations can help support strong, sustainable, balanced, and inclusive growth by mobilising domestic revenue and strengthening macroeconomic institutions,” the IMF said.

The recommendations come as Nigeria enters another phase of its economic reform programme, with the government seeking to increase non-oil revenue while simplifying the tax system.

The new tax regime, which took effect in January 2026, introduced the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service (Establishment) Act and Joint Revenue Board (Establishment) Act.

The reforms are designed to eliminate duplicate taxes, harmonise tax administration, improve compliance and reduce the burden on smaller businesses.

However, the persistence of multiple taxes and government levies remains a major concern for businesses.

The Central Bank of Nigeria’s July 2026 Business Expectations Survey showed that 70.8 per cent of respondents identified high and multiple taxation as their biggest constraint, ahead of insecurity and high interest rates.

The finding presents a significant challenge for policymakers because higher revenue mobilisation could undermine productivity and investment if businesses continue to face multiple and unpredictable charges.

The IMF’s call for stronger monetary policy transmission also comes after one of the most aggressive tightening cycles in Nigeria’s recent history.

The CBN’s Monetary Policy Rate, which stood at 18.75 per cent in 2023, rose to 22.75 per cent in February 2024 and eventually reached 27.5 per cent by the end of 2024.

The apex bank also tightened liquidity conditions, raising the Cash Reserve Ratio from 32.5 per cent to 45 per cent in early 2024 and subsequently to 50 per cent.

The tightening was aimed at containing inflation, improving foreign exchange market stability and rebuilding investor confidence.

The CBN has since moved gradually towards monetary easing as inflation pressures have moderated and macroeconomic conditions improved.

However, Presidential aide Tope Fasua has called for a rethink of the tight monetary stance, arguing that prolonged high interest rates could constrain economic growth without necessarily delivering a proportionate reduction in inflation.

The IMF’s latest recommendations therefore come at a critical point in Nigeria’s economic adjustment, where policymakers must balance inflation control and fiscal consolidation against the need to support private-sector investment and job creation.

The Fund has also previously raised concerns about Nigeria’s use of innovative sovereign financing arrangements.

In June, the IMF cautioned Nigeria over its plan to raise to $5 billion through a derivatives-based financing arrangement with First Abu Dhabi Bank, warning that such structures could expose governments to risks that may be difficult to assess because of their complexity.

The broader reform agenda also comes as Nigeria continues to deepen financial and infrastructure relationships with the United Arab Emirates. In December, the Federal Government secured about $1.2 billion in UAE financing for the construction of a key segment of the Lagos-Calabar Coastal Highway.

For Nigeria, the IMF message is increasingly clear: raising revenue alone will not deliver sustainable growth.

The next phase of reform must improve the efficiency with which government collects and spends money, make monetary policy more effective, strengthen transparency and create a business environment where higher taxes and tighter financial conditions do not overwhelm private investment.

The central economic test is whether Nigeria can convert its improving macroeconomic position into lower business costs, stronger investment, higher productivity and more jobs, rather than simply better headline fiscal and monetary indicators.