Fund Says Blanket Fuel Subsidies Strain Public Finances, Urges FG to Protect Vulnerable Households Through Social Safety Nets
The International Monetary Fund (IMF) has advised the Federal Government against restoring a broad petrol subsidy, recommending targeted financial assistance to vulnerable households to cushion the impact of rising energy costs.
The Fund warned that blanket fuel subsidies are expensive, often benefit higher-income consumers disproportionately and place additional pressure on government finances, particularly amid rising borrowing costs.
The Director of the IMF’s Fiscal Affairs Department, Rodrigo Valdes, stated this during a press briefing on the Fiscal Monitor at the 2026 Annual Meetings of the IMF and World Bank in Bangkok.
Valdes was responding to a question about the impact of allowing energy prices to reflect market scarcity, particularly in Nigeria, where higher petrol prices can increase transportation costs, fuel inflation and deepen poverty.
The question also referenced growing calls for the government to restore the petrol subsidy ahead of an election year.
“Protecting people is not the same as protecting the price of fuels,” Valdes said.
He explained that fuel subsidies and other measures designed to prevent energy prices from adjusting fully to shocks had cost countries between one and 1.5 per cent of their gross domestic product in 2026.
Rather than subsidising fuel prices across the board, the IMF official urged governments to strengthen social safety nets and use household data to identify people who genuinely need assistance.
According to the Fund’s position, targeted support would help cushion the effects of higher energy costs on vulnerable households without imposing the same level of financial burden associated with universal fuel subsidies.
Meanwhile, the Federal Government recently announced a 30-day petrol discount at Nigerian National Petroleum Company Limited retail outlets as part of efforts to ease the impact of rising fuel prices.
The initiative prioritises public transport operators, who face higher operating costs that can translate into increased fares for commuters.
The IMF’s recommendation comes amid continued concerns over the wider effects of petrol prices on transportation, food costs and household purchasing power in Nigeria.