The International Monetary Fund (IMF) has urged Nigeria to resist calls for the restoration of blanket petrol subsidies, recommending targeted assistance for vulnerable households as rising energy costs continue to squeeze consumers.
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.
His remarks came amid renewed calls for the Federal Government to reconsider petrol subsidy removal ahead of the 2027 general elections, as higher fuel prices continue to raise transportation costs and put pressure on household budgets.
Valdés acknowledged the political difficulties governments face when fuel prices rise but warned that keeping prices artificially low for all consumers could place a heavy burden on public finances.
He argued that governments would achieve better results by redirecting resources spent on universal fuel subsidies towards people most affected by rising energy costs.
According to him, governments should explain that increases in fuel prices are partly driven by global supply shocks and that shielding every consumer from the effects could be extremely expensive.
Valdés said targeted interventions would be more effective than blanket subsidies, suggesting that governments could subsidise public transportation costs instead of reducing fuel prices for everyone.
He noted that rising fuel prices could be addressed through measures that reduce the burden on commuters, including assistance with bus fares and other transportation expenses.
The IMF has consistently argued that broad fuel subsidies are often regressive because higher-income households tend to consume more fuel and consequently receive a larger share of the benefits.
The fund also warned that preventing fuel prices from reflecting supply constraints could encourage continued consumption when supplies are limited, potentially intensifying pressure on global energy prices.
Meanwhile, a division chief in the IMF’s Fiscal Affairs Department, Davide Furceri, recommended that governments consider temporary and targeted interventions to protect vulnerable populations from rising living costs.
He suggested measures such as school feeding programmes, assistance for vulnerable farmers, geographically targeted support and relief for public transportation users.
Furceri acknowledged that some countries lacked comprehensive household databases and digital payment systems needed to identify beneficiaries and deliver assistance efficiently.
However, he said governments could explore alternative methods of providing relief while developing stronger systems for identifying vulnerable households.
He stressed that such interventions should be limited, targeted and temporary.
In Nigeria, the Federal Government recently announced a 30-day petrol discount at Nigerian National Petroleum Company Limited retail outlets as part of efforts to ease the impact of rising fuel prices, with public transportation operators given priority.
Finance Minister Taiwo Oyedele said the NNPC retail business would forgo its retail profit margin to sell petrol at cost during the period, describing the measure as temporary relief rather than a return to petrol subsidy.
The government has also proposed negotiating a ceiling of N1,350 per litre on petrol’s ex-gantry or landing cost, subject to monthly reviews.
The IMF’s recommendation highlights the challenge facing the Federal Government as it seeks to cushion Nigerians against rising energy and transportation costs without reintroducing a broad subsidy that could place additional pressure on public finances.
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