IMF warns Nigeria against restoring petrol subsidy

The International Monetary Fund (IMF) has urged the Federal Government to resist calls to restore a broad petrol subsidy, recommending targeted financial assistance for vulnerable households struggling with rising energy costs.

The Fund warned that reinstating a general fuel subsidy would increase government spending, put additional pressure on public finances and disproportionately benefit higher-income consumers.

Instead, it advised the government to rely on social safety nets and household data to identify Nigerians who need financial support as rising petrol prices threaten to increase transportation costs and worsen inflation.

The IMF’s Director of the Fiscal Affairs Department, Rodrigo Valdes, gave the advice during a press briefing on the Fiscal Monitor at the 2026 Annual Meetings of the IMF and World Bank in Bangkok.

Responding to concerns about the consequences of allowing energy prices to reflect supply shortages, Valdes addressed the potential impact of higher fuel prices on transport fares, inflation and poverty in Nigeria.

The question also highlighted growing calls for the government to restore petrol subsidies ahead of an election year, amid concerns that rising fuel costs could further strain household finances.

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“Protecting people is not the same as protecting the price of fuels,” Valdés said.

He explained that fuel subsidies and other measures that prevent energy prices from adjusting fully to supply shocks had cost countries between one per cent and 1.5 per cent of gross domestic product (GDP) in 2026.

Valdes said governments could better protect vulnerable citizens by directing assistance to households that need it rather than subsidising fuel prices for everyone.

The IMF’s position comes as the Federal Government seeks to ease the effects of rising petrol prices through temporary relief measures.

The government recently announced a 30-day petrol discount at Nigerian National Petroleum Company (NNPC) Limited retail stations, with public transport operators given priority to help reduce the burden of higher fuel costs.