The International Monetary Fund (IMF) has stated that high property taxes is an important but underutilised source of revenue for Nigeria.

This was stated in a recent post in its blog, titled, “How Property Taxes Can Help Low-Income Countries to Develop.” achieve economic growth and sustainability.

What IMF Has to Say About How Property Can Help Nigeria’s Economic Stability

Source: @IMF/ Twitter

According to the IMF, effective property tax reforms, especially in urban areas like Lagos, could significantly boost local revenues. This will help in funding vital infrastructure and services.  

The IMF stated that global governments will need to raise an estimated $3 trillion to meet development goals by 2030.  Emerging economies require 4 percent of their GDP and low-income countries a challenging 16 per cent to achieve this.

It stated: “How can countries finance such staggering price tags? Large cities such as Delhi and Lagos show a way forward: Taxing property more efficiently can play a meaningful role in raising revenue at the local level, allowing countries to invest more in their people, new IMF analysis shows.

Previous IMF research has shown that countries have ample potential to raise more domestic tax revenue if they need it up to 5 percentage points of GDP over two decades.”

For countries which face high revenue needs and limited income frameworks, like Nigeria, property taxes offer an attainable alternative. 

Also, the IMF’s findings reveal that countries in Africa and Asia generate only around 0.1 percent of GDP through property taxes. This is low compared to over 1 percent in the OECD and up to 3 percent in some advanced economies.

“Of course, the political challenges of such reforms are far from trivial, as recent events in several countries suggest that raising taxes can create social unrest.

More efficiently, real estate taxes have an advantage in this regard: by being locally collected and spent, they may be politically less challenging than increases in broad-base national taxes,” the report said.

IMF also observed that recurrent taxes on immovable property could help local governments capture the wealth generated through intensive urbanization. They believe generating such revenue fairly is important given the difficulty in taxing income and wealth, which is common in developing countries.

IMF Recommendation to Boost Economic Sustainability

The IMF recommended that municipalities gradually shift from fixed area-based taxes to a full value-based system. This will increase economic sustainability as technological and valuation abilities improve. 

“The potential for growth in property tax revenue is there, but it requires smart reforms and technological advances to make it happen,” stated a senior IMF analyst.

Technologies such as geographic information systems (GIS) and drones are already in use in cities like Delhi and Bangalore to track property changes accurately. The IMF is encouraging similar measures to be adopted in Nigeria.

“An area-based approach initially, supported by the precision of modern mapping tools, can help countries transition smoothly to market-value-based property taxes. This pathway makes property-tax reform practical and politically appealing, especially when well-communicated to the public,” the body also observed.

Furthermore, the IMF believes that with proper implementation, property taxes can help Nigeria improve local services, enhance economic stability, and foster inclusive growth. This will surely pave way for a stronger foundation.

In Addition, the IMF encourages transparency in the whole reform process. “Transparency is key,” the IMF emphasized. It helps build public trust in the property tax system and ensures funds are used responsibly.”