The International Monetary Fund (IMF) has advised Nigeria to resist calls to restore broad-based petrol subsidies, recommending targeted transport support and better public spending to protect vulnerable households without worsening pressure on government finances.
The Fund said directing relief to people most affected by higher fuel prices would be more effective than subsidising petrol for everyone, particularly as rising debt-servicing costs leave governments with less money to meet other needs.
Rodrigo Valdés, Director of the IMF’s Fiscal Affairs Department, gave the advice on Wednesday during a press briefing on the Fund’s Fiscal Monitor at the ongoing IMF/World Bank Annual Meetings.
Responding to questions on Nigeria’s rising inflation, transport costs and calls to restore fuel subsidies ahead of an election year, Valdés said the current increase in fuel prices was driven by a global energy shock that governments could not afford to ignore.
He said governments should redirect resources that would otherwise be spent on broad subsidies towards more vulnerable groups.
“Third, it is much better to use some of that money that you will spend in the subsidies channels towards more vulnerable people,” Valdés said. “For example, you mentioned transportation costs. Yes, gasoline could go up, and perhaps bus fees may be subsidised in a way. There is a much better policy at the end of the day than just a blanket subsidy for everybody.”
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Pinnacle Daily reports that a blanket subsidy is a government intervention that lowers prices broadly, regardless of whether recipients need financial assistance.
The IMF official warned that fuel subsidies were expensive and could benefit higher-income consumers disproportionately because they generally consume more fuel.
He added that keeping domestic prices artificially low could prevent demand from adjusting to reduced global fuel supplies, forcing prices higher and shifting part of the cost to other countries.
The advice comes as Nigeria faces the challenge of balancing the cost-of-living pressures associated with higher energy prices against growing debt obligations.
During the briefing, a Nigerian journalist noted that debt service was projected to consume about 42 per cent of government revenue for the year, despite increased revenue following tax reforms and fuel subsidy removal.
Davide Furceri, Division Chief in the IMF’s Fiscal Affairs Department, said countries with low tax revenue had to improve revenue collection while ensuring their tax systems did not discourage investment and economic activity.
He said governments also needed to redirect spending towards priorities that support long-term growth, including education, healthcare and investment, while replacing broad subsidies with targeted interventions.
Furceri noted that support could be delivered through existing systems or alternative arrangements, including school feeding programmes, geographical targeting and assistance to farmers.
The IMF also stressed that fiscal consolidation—the process of reducing budget deficits and stabilising public debt—should reflect each country’s circumstances.
Valdés said the urgency was for countries facing major fiscal imbalances to begin taking corrective steps, rather than apply the same pace of adjustment everywhere.
The Fund’s central message was that Nigeria could protect vulnerable citizens without returning to a broad fuel subsidy regime, by improving tax collection, spending public funds more efficiently and directing relief to those who need it most.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X