Governments should avoid relying on broad food price subsidies during periods of rising food prices because they can consume scarce public resources while disproportionately benefiting wealthier households, the International Monetary Fund (IMF) has warned.
In a report shared on Thursday, September 2026, the IMF said governments should instead diagnose the cause of a food-price shock before deciding whether to use subsidies, food vouchers or direct food distribution.
The Fund said food affordability had become a major socio-economic concern, particularly for low-income households, which can spend more than half of their income on food.
It warned that future shocks could come from extreme weather linked to El Niño, conflicts that disrupt fertiliser and energy supplies, or breakdowns in food production and distribution.
The IMF noted that the 2015-16 El Niño affected food security for about 60 million people globally, while food-price increases following Russia’s war in Ukraine pushed about 71 million people into poverty within three months in 2022.
It also said fertiliser prices rose by almost 50 per cent after the Middle East war started earlier this year. Although prices later normalised, the increase coincided with planting seasons in several countries, meaning higher input costs could continue affecting farmers, crop yields and food prices.
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Data shows that food prices in Nigeria have more than doubled since mid-2023, with some staples recording increases of between 100 per cent and nearly 470 per cent.
Yams, plantains and grains are among the food items that have recorded the sharpest increases, while prices of imported and locally produced rice have risen by more than 180 per cent.
Pinnacle Daily reports that food inflation stood at 24.82 per cent when President Bola Tinubu assumed office in May 2023 and later rose above 40 per cent before easing to 19.57 per cent year-on-year in August 2026.
Favours targeted support over broad subsidies
The IMF said governments should first determine whether food is available, whether affordability is the main problem, whether markets are functioning properly and whether beneficiaries can be effectively identified.
The answers, it said, should guide the choice of intervention.
Price subsidies can be introduced quickly and require limited administrative capacity, making them attractive during emergencies. However, the IMF said they are expensive and often benefit richer households that consume more food and are less affected by price changes.
It recommended that subsidies should be “exceptional, temporary, transparent, and tightly circumscribed.”
Instead of keeping domestic prices artificially low, governments should allow them to reflect international costs while providing temporary and targeted support to vulnerable households and viable small businesses.
Food vouchers, which allow eligible households to buy food using government-funded credits, can provide more targeted assistance where governments have effective social registries and digital payment systems.
However, the IMF stressed that vouchers and subsidies cannot solve a shortage of physical food.
Where conflict, natural disasters or damaged supply chains make food unavailable, direct food transfers are necessary. Such programmes involve governments or aid agencies providing food directly to affected households.
The Fund cited the 2015-16 El Niño, when drought and saltwater intrusion severely reduced rice production in Vietnam, with some farmers losing 90 per cent of their harvest. In Southern Africa, lower maize harvests affected 40 million people.
Urges clear exit plans
The IMF warned that poorly designed food subsidies can consume funds that governments could otherwise use for agricultural research, infrastructure, healthcare and education.
It said spending on generalised food subsidies often rises sharply during crises, particularly in low-income countries, creating pressure on already limited government resources.
The Fund therefore urged governments to establish clear exit strategies because temporary measures can become permanent once people begin to view them as entitlements.
It said governments should gradually shift from broad subsidies to more targeted and efficient assistance as emergencies ease, while strengthening the administrative systems needed to identify vulnerable households.
“There is no universal blueprint for food assistance,” the IMF said, urging governments to assess their food-support systems before a crisis occurs.
It maintained that governments that properly identify whether the problem is food availability, affordability, market disruption or weak administrative capacity would be better positioned to protect vulnerable citizens while keeping the cost of intervention under control.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X