The International Monetary Fund (IMF) has cautioned Nigeria against restoring petrol subsidies, arguing that the government can better support struggling households through direct financial assistance and reduced costs of essential services.....KINDLY READ THE FULL STORY HERE▶
The global financial institution warned that keeping petrol prices artificially low would place additional pressure on public finances, while wealthier consumers could benefit more from the arrangement than low-income households.
The Director of the IMF’s Fiscal Affairs Department, Rodrigo Valdés, gave the advice on Wednesday during a briefing on the fund’s Fiscal Monitor at the 2026 annual meetings of the IMF and World Bank in Bangkok, Thailand.
Valdés was responding to concerns about the impact of rising energy prices on Nigerians, particularly the increase in transport fares, inflation and the overall cost of living.
The debate over petrol subsidy has continued in Nigeria, with calls for its restoration ahead of the 2027 general election as households and motorists grapple with high fuel prices.
The IMF official maintained that protecting citizens from rising energy costs should not mean keeping fuel prices artificially low for all consumers.
“Protecting people is not the same as protecting the price of fuels,” he said.
According to Valdés, fuel subsidies and other measures that prevent energy prices from reflecting supply shortages cost countries between one and 1.5 per cent of their gross domestic product in 2026.
He argued that such expenditure was difficult to sustain, particularly as governments faced increasing borrowing costs.
“It’s first fiscally very costly, and second, if you look at the pattern of consumption, it’s easy to see that that subsidy is readily regressive in many places,” Valdés stated.
He urged the Nigerian government to rely on household data and social protection programmes to identify and assist people who genuinely need support, rather than subsidising petrol for everyone.
“There are better tools to deal with this,” he added.
The IMF’s position comes days after President Bola Tinubu’s administration announced a 30-day petrol discount at Nigerian National Petroleum Company Limited (NNPC) retail stations to cushion the impact of rising fuel prices.
The initiative prioritises public transport operators, with the aim of limiting the effect of petrol costs on transport fares and other household expenses.
Minister of Finance Taiwo Oyedele explained that NNPC retail outlets would sell petrol at cost by surrendering their retail profit margins.
He described the initiative as temporary relief for consumers rather than a return to the petrol subsidy regime.
The government also proposed negotiating a ceiling of ₦1,350 per litre on petrol’s ex-gantry or landing cost, subject to monthly reviews.
Meanwhile, the IMF called on governments to explore alternative measures to protect vulnerable households from rising fuel prices without introducing blanket subsidies.
Davide Furceri, a division chief in the fund’s Fiscal Affairs Department, said funds used for general fuel subsidies could instead be channelled towards people most affected by rising living costs.
He suggested that governments could subsidise public transport fares to prevent higher petrol prices from making daily journeys unaffordable.
“For example, you mentioned transportation costs. 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,” Furceri said.
He also identified school feeding programmes, assistance for vulnerable farmers and targeted support for people in affected areas as possible ways to ease the burden on households.
Furceri acknowledged that some countries lacked reliable household records and digital payment systems needed to identify beneficiaries and distribute financial assistance effectively.
However, he said governments could adopt alternative arrangements in the short term while developing more efficient systems for delivering support.
He stressed that any intervention should be temporary and targeted at those who needed it most.
Valdés also warned that keeping fuel prices below market levels could increase pressure on global energy supplies.
He explained that subsidised petrol reduces consumers’ incentives to cut consumption, even when fuel supplies are limited.
As a result, the market is forced to make a larger adjustment, potentially driving prices higher.
“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.”
The IMF reiterated that broad fuel subsidies were expensive, often disproportionately benefited higher-income consumers and could create additional pressure on the wider global economy.
