BUSINESS
IMF Predicts 0.5% GDP Revenue Loss for Nigeria
Torough David, Abuja
The Federal Government may lose as much as 0.5 percent of the country’s Gross Domestic Product in revenue following its decision not to raise the Value Added Tax rate, the International Monetary Fund has disclosed.
In its latest Article IV Consultation Report on Nigeria, the IMF stated that although the recent tax reforms approved by the National Assembly and President Bola Tinubu represent a major step forward in modernising the VAT and Company Income Tax regimes, the choice to maintain the current VAT rate would lead to an immediate revenue shortfall.
“The decision not to raise the VAT rate now is reasonable, given high poverty and food insecurity, and with the cash transfer system to support the most vulnerable households not yet fully rolled out. However, this will reduce consolidated government revenue by up to ½ per cent of GDP in the authorities’ estimates,” the report noted.
While the Federal Government is expected to be largely insulated from the fallout—thanks to expected gains from improved CIT compliance—the blow will be felt most by state and local governments.
According to the Fund, unless alternative financing options are found, subnational governments may be forced to either scale back spending or ramp up their own revenue efforts.
The IMF, however, acknowledged the government’s justification for delaying a VAT hike, particularly at a time of worsening poverty and food insecurity.
With only 5.5 million of the targeted 15 million households reached under the federal cash transfer programme, the Fund noted that raising VAT at this stage could further strain vulnerable households.
Nonetheless, it cautioned that the cost of delaying reform would fall on already stretched public finances, especially at the subnational level.
“Assuming no alternative financing sources, they [states and LGAs] would have to raise additional revenue or reduce spending, which is assumed in the baseline,” the report said.
Despite this challenge, the IMF welcomed the tax reform agenda being driven by the Presidential Committee on Fiscal Policy and Tax Reforms, describing it as critical to reversing Nigeria’s poor revenue-to-GDP ratio, one of the lowest globally.
The reforms aim to boost compliance and enforcement, and the Fund believes they hold “significant medium-term revenue potential” once fully implemented.
Measures include modernising the VAT and CIT frameworks, tightening exemptions, and introducing digital tools to monitor compliance. Total revenue and grants reached 14.4 per cent of GDP in 2024, up from 9.8 per cent in 2023, buoyed by currency depreciation and improved administration.
However, public debt also rose, hitting 52.9 percent of GDP last year, with interest payments consuming 41.1 percent of Federal Government revenue. The IMF advised the government to maintain a neutral fiscal stance in 2025, stressing that revenue shortfalls should not lead to excessive borrowing.
It also urged the authorities to clearly set out a medium-term revenue plan, including timelines for further tax policy changes, to restore investor confidence and ensure policy credibility.
The report stated, “Pre-committing to an implementation timeline for further policy measures in an updated medium-term framework would support fiscal sustainability and provide guidance on available fiscal space for development spending and support for the most vulnerable households.”
Nigeria’s decision not to raise VAT comes at a time of heightened global and domestic uncertainty. Lower oil prices, rising financing costs, and mounting social pressures have narrowed the government’s fiscal space.
The IMF observed that while reforms since 2023—including fuel subsidy removal and the liberalisation of the foreign exchange market—have improved macroeconomic stability, their benefits have yet to trickle down to most Nigerians.
With inflation still elevated at 22.9 per cent as of May 2025, and poverty levels worsening, the government appears to be prioritising stability over revenue acceleration, for now.
However, the IMF warned that the long-term cost of inaction could be higher if reforms stall or if subnational governments struggle to adjust.
In the meantime, the IMF continues to support Nigeria’s reform efforts, including through capacity development and the deployment of a resident advisor to assist with revenue mobilisation strategies.
The Nigeria Economic Summit Group warned that the Federal Government could face revenue shortfalls if it does not increase the value-added tax rate as part of the ongoing tax reform process.
The Chief Executive Officer of NESG, Dr. Tayo Aduloju, made this statement during an interactive media session in Abuja. He emphasised that while reforms in the VAT system are essential, maintaining the current VAT rate without an increase could lead to a significant loss of revenue for the government.
Speaking on the issue, Aduloju said, “Without those rate hikes, it means that the government might lose some revenue.” Aduloju explained that the current tax reform process must strike a balance between simplifying the tax system and increasing the VAT rate to maintain revenue stability.
According to him, simply reducing the number of taxes without adjusting the VAT rate could weaken the government’s revenue base.
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The Organization of the Petroleum Exporting Countries (OPEC), has revised downward its 2026 global oil demand growth estimates, citing expected slower consumption growth in advanced economies, where collective demand will rise by only 100,000 barrels per day.
The cartel said it now expects global oil demand growth to reach 1.
2 million barrels per day in 2026, down from its previous forecast of 1. 4 million barrels per day, explaining that the revision would bring total global oil consumption to 106.3 million barrels per day.In Europe, oil demand will decline by 30,000 barrels per day as weaker economic activity weighs on consumption, OPEC, said in its monthly oil market report.
The OPEC also expects some Asian economies, particularly Japan, to record slower demand growth. The organization forecast Japanese oil consumption to fall by 80,000 barrels per day.
However, strong demand from major emerging economies partly offset these weaker signals.
The OPEC said China would add 250,000 barrels per day to global demand, supported by its petrochemical industry. The organization also forecast India to increase demand by 200,000 barrels per day, driven by infrastructure spending and growth in vehicle ownership. Overall, OPEC expects emerging economies and developing countries to contribute an additional 1.1 million barrels per day to global oil consumption in 2026.
The OPEC’s revision aligns with a broader reassessment of global oil demand expectations.
In its May 2026 report, the International Energy Agency projected a much sharper downturn. The agency forecast a contraction of 420,000 barrels per day in global oil demand for the full year rather than a slowdown in growth.
The gap between the two institutions now exceeds 1 million barrels per day, highlighting the uncertainty surrounding the market outlook.
Both reports identified the near-closure of the Strait of Hormuz as a major factor behind market instability. According to the U.S. Energy Information Administration, six Gulf countries collectively reduced production by 10.5 million barrels per day in April, marking what the agency described as an unprecedented contraction outside pandemic periods.
As supply shortages intensified, oil producers outside the Middle East moved to increase production to offset part of the missing volumes. Several African producers, including Nigeria, Libya and Angola, benefited from rising demand for Atlantic Basin crude among Asian and European buyers that lost access to Gulf oil supplies, according to the IEA.
However, not all African producers can fully capitalize on the opportunity. Nigeria, Africa’s largest oil producer and an OPEC member, nonetheless showed encouraging momentum. According to provisional data published on May 15 by the Nigerian Upstream Petroleum Regulatory Commission, the country increased oil production from 1.546 million barrels per day in March to 1.663 million barrels per day in April 2026.
The Nigerian Content Development and Monitoring Board (NCDMB) has reaffirmed that compliance with Nigerian Content regulations in the oil and gas industry remains non-negotiable.
The Executive Secretary of NCDMB, Felix Ogbe, stated this on Tuesday at the 2026 Nigerian Oil and Gas Midstream and Downstream Stakeholders Summit in Lagos.
Ogbe was represented by Austin Uzoka, Head of the Directorate of Planning, Research and Statistics.
He said the midstream and downstream sectors remained vital to Nigeria’s economic expansion, industrialisation and job creation efforts.
The summit focused on the theme, ‘Unlocking, Growing and Sustaining Nigerian Content Development in Nigeria’s Oil and Gas Midstream and Downstream Sectors.’
Ogbe described the gathering as a strategic platform for shaping the future direction of Nigeria’s energy industry and strengthening indigenous participation.
According to him, reforms, improved regulatory clarity and growing investor confidence are repositioning Nigeria as a leading oil and gas investment destination in Africa.
He noted that the Board, established under the Nigerian Oil and Gas Industry Content Development Act 2010, continued promoting local capacity development and technology transfer.
Ogbe added that the Board had also advanced employment opportunities for Nigerians across several segments of the oil and gas industry.
He said Nigerian companies had recorded significant achievements in upstream operations, particularly in exploration, drilling, engineering, fabrication and project management activities.
According to him, the next growth phase lies within the midstream and downstream sectors of the nation’s petroleum industry.
He identified gas processing, transportation infrastructure, storage facilities, LPG and CNG distribution, refining and petrochemical development as major investment opportunities.
Ogbe said Nigeria was gradually reducing dependence on imported refined petroleum products through increased local refining and processing capacity.
He described the Dangote Refinery as a strong symbol of Nigeria’s industrial ambition, energy independence and economic self-sufficiency.
Ogbe stated that modular refineries were equally opening fresh opportunities for indigenous participation, local investment and improved national energy security.
He also highlighted ongoing gas commercialisation projects as important drivers of industrialisation and value addition within the domestic economy.
The NCDMB boss specifically referenced the Nigeria LNG Train 7 project and the Federal Government’s Presidential Initiative on Compressed Natural Gas.
According to him, both initiatives would strengthen domestic gas utilisation and support broader industrial growth across the country.
While emphasising the Board’s regulatory responsibilities, Ogbe insisted that compliance with Nigerian Content requirements remained central to industry operations.
“Compliance remains non-negotiable, but it must also be practical, implementable and supportive of investment and business growth,” he said.
He urged policymakers, investors, operators and service providers to deepen collaboration in order to maximise opportunities within the sector.
Ogbe said stronger partnerships would help drive sustainable economic growth, industrial capacity and long-term competitiveness in Nigeria’s energy industry.
The two-day summit attracted major stakeholders from the oil and gas industry to discuss strategies for expanding local content development.
Participants also examined ways to strengthen industrial capacity and improve Nigeria’s competitiveness within the global energy market.
Dangote Petroleum Refinery has reduced the price of aviation fuel, also known as Jet A1, from N1,750 to N1,650 per litre.
The company said the move is aimed at reducing the financial burden on airline operators and ensuring steady fuel supply across the country.
The development was announced in a statement issued on Tuesday in Lagos by the company’s spokesperson, Anthony Chiejina.
According to him, the refinery also introduced a 30-day interest-free credit facility for marketers and airline operators backed by bank guarantees.
He added that the company had also changed its pricing structure from dollar-based transactions to payments in Naira, a move expected to ease pressure on local operators.
Chiejina stated that the reduction was necessary due growing concerns over the rising operational costs in Nigeria’s aviation sector.
According to him, aviation fuel accounts for a major part of airline expenses.
He said, “Industry stakeholders have repeatedly warned that the increasing cost of Jet A1 fuel was putting serious financial pressure on domestic airlines and threatening smooth flight operations.
“The refinery’s latest decision is expected to provide relief for airline operators by lowering fuel costs, improving operational stability and supporting efforts to reduce airfares for passengers.”
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