The International Monetary Fund (IMF) has highlighted property tax as a critical but underutilized revenue source for Nigeria and other low-income countries in their pursuit of sustainable growth.
In a recent blog post titled “How Property Taxes Can Help Low-Income Countries to Develop”, the IMF proposed that efficient property tax reforms—particularly in urban centers like Lagos—could significantly increase local government revenues, enabling funding for essential infrastructure and services.
According to IMF estimates, global governments will require an additional $3 trillion to meet development goals by 2030. Emerging markets will need to raise an equivalent of 4 percent of their GDP, while low-income countries will need 16 percent, a significantly higher target.
In regions like Nigeria, where high revenue demands are coupled with limited income and wealth tax frameworks, property taxes present a viable alternative, the IMF said. Findings from the IMF indicate that countries in Africa and Asia currently collect only around 0.1 percent of GDP from property taxes, compared to over 1 percent in OECD countries and up to 3 percent in certain advanced economies.
The IMF blog stated, “The world’s governments must raise an additional $3 trillion to achieve sustainable and inclusive economic growth goals this decade. The cost in emerging markets equals 4 percent of gross domestic product and 16 percent for low-income countries.”
The IMF emphasized the potential of property tax reforms in large urban areas, such as Delhi and Lagos, noting that improved property tax collection could significantly contribute to local revenue. Prior IMF research has shown that countries can increase domestic tax revenue by up to 5 percentage points of GDP over two decades if needed.
The IMF acknowledged the political difficulties surrounding tax reforms, pointing to recent examples of social unrest in response to tax increases. However, the report suggested that locally collected property taxes could face fewer political challenges compared to broader national tax hikes.
The organization also observed that recurring taxes on immovable property could allow local governments to capture the wealth generated by urban development, especially in light of challenges with income and wealth taxes in developing economies.
The IMF further highlighted that advanced economies collect more than 1 percent of GDP from property taxes on average, with some raising nearly 3 percent, while emerging regions in Asia and Africa only achieve 0.1 percent. The IMF suggested that with the right policy changes and technology—such as satellite imagery and drones—property tax collection could become ten times more effective.
To ensure sustainable adoption, the IMF recommended that municipalities gradually transition from area-based taxes to a full market value-based system as technology and valuation methods improve. The use of geographic information systems (GIS) and drones in cities like Delhi and Bangalore to track property changes was noted as a model, with the IMF encouraging similar approaches 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 IMF observed.
The IMF reiterated that with effective implementation, property taxes could help resource-constrained countries like Nigeria enhance local services, strengthen economic stability, and promote inclusive growth, laying a foundation for a more resilient fiscal future.
