IMF Warns Nigeria Against Fuel Subsidy Return, Urges Targeted Relief

By Sabiu Abdullahi

The International Monetary Fund (IMF) has cautioned the Nigerian government against restoring blanket petrol subsidies, advising it to direct financial support towards vulnerable households struggling with rising fuel and transportation costs.

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.

He was responding to growing calls for the reinstatement of petrol subsidies in Nigeria amid rising energy prices and political pressure ahead of the 2027 general elections.

Valdés acknowledged that increases in petrol and diesel prices could create significant political challenges for governments. However, he warned that subsidising fuel consumption for everyone could place an additional 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 assistance would offer greater benefits to low-income households than a universal subsidy that applies to all consumers, regardless of their financial circumstances.

He also proposed transport support as a possible alternative to reducing petrol prices 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,” Valdés said.

The IMF has consistently argued that universal fuel subsidies can strain public finances while disproportionately benefiting wealthier households, which typically consume more petroleum products.

FG Introduces Temporary Petrol Price Relief

The IMF’s warning comes amid renewed concerns over petrol affordability in Nigeria, where rising international energy prices have increased pressure on household budgets and transport operators.

In response, the Federal Government recently introduced a 30-day petrol price discount at Nigerian National Petroleum Company Limited (NNPC) retail outlets, with public transport operators listed among the priority beneficiaries.

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said the arrangement required NNPC Retail to temporarily forgo its profit margin and sell petrol at cost to provide relief to consumers.

Oyedele stressed that the measure was a temporary intervention and did not represent a return to the former petrol subsidy system.

IMF Raises Concern Over Fuel Demand

Beyond the financial implications, Valdés warned that keeping fuel prices artificially low during periods of supply disruption could encourage consumption and worsen pressure on global petroleum supplies.

According to the IMF’s position, allowing fuel prices to reflect market conditions can encourage consumers to moderate demand when supplies are limited.

The fund’s recommendation places emphasis on targeted support for vulnerable Nigerians, particularly those most affected by rising living costs, rather than a nationwide subsidy that benefits consumers across all income groups.

The debate over petrol pricing remains a major economic and political issue in Nigeria, as the government faces pressure to ease the cost-of-living burden while maintaining fiscal stability.