The International Monetary Fund (IMF) has warned Nigeria to resist calls for the restoration of blanket petrol subsidies, recommending targeted financial support for vulnerable households as rising energy prices increase the cost of living.
Key Highlights
- The IMF has urged Nigeria to resist calls to restore blanket petrol subsidies.
- Rodrigo Valdés, Director of the IMF’s Fiscal Affairs Department, spoke at the IMF/World Bank annual meetings in Bangkok.
- The fund recommends targeted support, such as subsidised bus fares, for vulnerable groups.
- The Tinubu administration recently introduced a 30-day petrol discount at NNPC retail outlets.
- The government has proposed negotiating a ₦1,350 per litre ceiling for petrol’s ex-gantry or landing cost.
Rodrigo Valdés, Director of the IMF’s Fiscal Affairs Department, gave the advice on Wednesday during the IMF and World Bank Group annual meetings in Bangkok, Thailand, while responding to questions about growing calls for a return to petrol subsidies ahead of elections in Nigeria.
Valdés acknowledged that rising fuel prices create significant political pressure for governments but warned that keeping prices artificially low for all consumers could place a heavy burden on public finances.
He argued that governments should explain the global factors driving higher energy prices and direct available resources towards citizens who are most affected.
“At the end of the day, it’s very tempting politically speaking because it’s not trivial the political effect of the price of oil, of fuels, of gasoline, of diesel,” he said.
He added that governments must recognise the financial implications of cushioning the entire population against global price increases.
“And third, it’s much better to use some of that money that would you spend in the subsidies channeled towards more vulnerable people,” Valdés said.
The IMF official maintained that targeted interventions would provide a more effective response than subsidising fuel consumption across the board.
“Yeah, gasoline could go up and perhaps bus fees may be subsidised in a way. That is a much better policy at the end of the day than just a blanket subsidy for everybody,” he said.
FG’s 30-Day Petrol Discount
The recommendation comes as Nigeria faces renewed concerns over petrol affordability following increases in global energy costs.
The Tinubu administration recently introduced a 30-day petrol discount at Nigerian National Petroleum Company Limited (NNPC) retail outlets, with public transport operators prioritised as part of efforts to ease the burden on consumers.
Finance Minister Taiwo Oyedele said the NNPC retail would sell petrol at cost by foregoing its retail profit margin. He described the arrangement as temporary relief rather than a reinstatement of the fuel subsidy regime.
The government has also proposed negotiating a ceiling of ₦1,350 per litre for petrol’s ex-gantry or landing cost, subject to monthly reviews.
Valdés further warned that blanket fuel subsidies could aggravate global energy pressures by discouraging consumers from adjusting their demand when supplies are limited.
“When you subsidise, you don’t allow, at the end of the day, demand to adjust,” he said.
“And reality is that we have less fuels in the world economy. That means that someone else has to adjust more, and the market produces a higher price for that.”
Targeted Support for Vulnerable Groups
The IMF also called for measures to protect households from the wider effects of higher fuel prices, particularly rising transportation costs.
Davide Furceri, a division chief in the fund’s Fiscal Affairs Department, said governments can redirect funds spent on general fuel subsidies towards public transport users and other vulnerable groups.
He identified school feeding programmes, location-based assistance and support for vulnerable farmers as possible ways to provide relief.
Read also:
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Furceri acknowledged that some countries lacked comprehensive household registries and digital payment systems needed to identify beneficiaries and distribute assistance efficiently.
However, he said governments could explore alternative delivery methods while building stronger systems for targeted support.
He stressed that such interventions should be limited, directed at those who need them most and temporary, rather than creating long-term fiscal obligations through blanket subsidies.
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