The International Monetary Fund has warned the Federal Government against restoring blanket petrol subsidies, urging it to channel public funds towards targeted assistance for vulnerable Nigerians struggling with rising fuel and transportation costs.
The Director of the IMF’s Fiscal Affairs Department, Rodrigo Valdés, gave the warning on Wednesday at the IMF and World Bank Group Annual Meetings in Bangkok, Thailand, amid renewed calls for the restoration of petrol subsidies ahead of the 2027 general elections.
Responding to questions about the growing pressure on the government to reinstate the subsidy regime, Valdés acknowledged that rising fuel prices could create political difficulties but cautioned that subsidising consumption for all Nigerians would place a heavy burden on public finances.
He said, “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.
“But you have to explain that this is a global shock, first. Second, that it’s very, very expensive for the country not to recognise that shock.
“And third, it’s much better to use some of that money that would be spent in the subsidies channelled towards more vulnerable people.”
The IMF official argued that targeted interventions would provide more effective relief to households facing the greatest financial hardship than a universal subsidy that benefits consumers regardless of income.
IMF Backs Transport Subsidies
Valdés identified transportation subsidies as a possible alternative, suggesting that governments could help commuters cope with higher fuel prices without subsidising petrol 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.
The IMF has consistently raised concerns about the fiscal cost of universal fuel subsidies, arguing that wealthier households often benefit disproportionately because they generally consume more petroleum products.
The latest warning comes amid concerns over petrol affordability in Nigeria, where increases in international energy prices have added to pressure on transportation costs and household budgets.
FG Introduces Temporary Petrol Discount
In response to concerns over fuel prices, the Federal Government recently introduced a 30-day petrol price discount at Nigerian National Petroleum Company Limited retail outlets, with public transport operators identified as priority beneficiaries.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said the arrangement would require NNPC Retail to temporarily forgo its profit margin and sell petrol at cost to ease the financial burden on consumers.
Oyedele, however, maintained that the intervention was a short-term measure and did not amount to a reinstatement of the petrol subsidy regime.
IMF Warns of Global Supply Pressures
Beyond the impact on public finances, Valdés warned that fuel subsidies could intensify pressure on global petroleum supplies by discouraging consumers from reducing demand when products become scarce.
According to the IMF, keeping fuel prices artificially low during supply disruptions could encourage consumption, increase pressure on available supplies and contribute to higher international prices.
