The International Monetary Fund (IMF) has cautioned the Federal Government against reintroducing a broad petrol subsidy, urging authorities to adopt targeted financial assistance for vulnerable households amid rising energy costs.
The Fund said a general fuel subsidy would place additional pressure on public finances while providing disproportionate benefits to wealthier consumers.
Rodrigo Valdes, Director of the IMF’s Fiscal Affairs Department, made the position known during a press briefing on the Fund’s Fiscal Monitor at the 2026 Annual Meetings of the IMF and the World Bank in Bangkok.
Valdes was responding to concerns that allowing fuel prices to reflect market conditions could increase transportation costs, fuel inflation and push more Nigerians into poverty, particularly as calls grow for the government to reconsider petrol subsidy removal ahead of an election year.
Defending the IMF’s position, Valdes stressed that protecting citizens from economic hardship should not necessarily mean keeping fuel prices artificially low.
“Protecting people is not the same as protecting the price of fuels,” he said.
According to the IMF official, broad fuel subsidies are costly and often fail to direct assistance to those who need it most. He warned that such interventions could further strain government finances, particularly at a time when borrowing costs are rising.
Valdes disclosed that countries seeking to shield consumers from energy price shocks through fuel subsidies or other measures that prevent prices from adjusting fully had incurred costs estimated at between one and 1.5 per cent of their gross domestic product (GDP) in 2026.
He argued that governments should instead strengthen social safety nets and use reliable household data to identify individuals and families requiring financial assistance.
The approach, according to the IMF, would enable governments to provide relief to the most affected citizens without committing substantial public resources to a blanket subsidy programme.
The recommendation comes amid continuing concerns in Nigeria over the effects of higher petrol prices on transportation, food prices and the general cost of living following the removal of the longstanding petrol subsidy.
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 burden of rising fuel prices.
The initiative reportedly prioritises public transport operators, with the aim of helping to reduce transportation expenses and cushion the impact of higher fuel costs on commuters.
However, the IMF’s latest position suggests that any long-term intervention should focus on direct assistance to vulnerable households rather than a general reduction in petrol prices.
The debate over petrol subsidy policy remains significant for Nigeria, where changes in fuel prices have far-reaching consequences for businesses, transport operators and households already grappling with rising living expenses.
