IMF warns Nigeria against restoring petrol subsidy, recommends support for vulnerable households

The International Monetary Fund (IMF) has advised the Federal Government against restoring a broad petrol subsidy, urging it to provide targeted financial assistance to vulnerable households struggling with rising energy and transportation costs.

The Fund warned that blanket fuel subsidies are expensive, tend to benefit higher-income consumers disproportionately and place additional pressure on government finances, particularly amid rising borrowing costs.

The Director of the IMF’s Fiscal Affairs Department, Rodrigo Valdés, stated the position during a press briefing on the Fiscal Monitor at the 2026 Annual Meetings of the IMF and World Bank in Bangkok.

His comments followed a question about the implications of allowing energy prices to reflect supply constraints, particularly in Nigeria, where higher petrol prices can increase transportation costs, fuel inflation and worsen poverty.

The question also highlighted growing calls for the government to reconsider petrol subsidy payments ahead of an election year.

Responding, Valdés said protecting citizens from the effects of rising energy prices did not necessarily require the government to keep fuel prices artificially low.

“Protecting people is not the same as protecting the price of fuels,” he said.

According to Valdés, fuel subsidies and other measures designed to prevent domestic energy prices from adjusting fully to external shocks had cost countries between one per cent and 1.5 per cent of their gross domestic product (GDP) in 2026.

He argued that governments should instead strengthen social safety nets and use household data to identify vulnerable citizens who require assistance.

The IMF’s recommendation favours directing limited public resources towards households most affected by rising living costs rather than maintaining a general subsidy that benefits consumers regardless of their income levels.

For Nigeria, the debate over petrol subsidy remains closely linked to the cost of living, transportation expenses, inflation and the government’s efforts to manage public spending.

The Fund’s position suggests that targeted interventions could provide relief to vulnerable households while reducing the fiscal burden associated with a broad-based fuel subsidy.

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