…calls for social protection programmes
The International Monetary Fund (IMF) has warned Nigeria against reinstating a blanket petrol subsidy, arguing that such a policy could place additional pressure on government finances while delivering disproportionate benefits to wealthier consumers.
Instead, the Fund urged the Federal Government to prioritise targeted financial assistance and social protection programmes for vulnerable households struggling with rising energy and transportation costs.
The Director of the IMF’s Fiscal Affairs Department, Rodrigo Valdés, made the recommendation on Wednesday during a press briefing on the Fiscal Monitor at the 2026 Annual Meetings of the IMF and World Bank in Bangkok, Thailand.
Valdés explained that although rising energy prices have intensified economic hardship, especially in developing countries, governments must distinguish between protecting vulnerable citizens and artificially keeping fuel prices low.
“Protecting people is not the same as protecting the price of fuels,” he said.
His remarks came in response to concerns over the implications of market-driven energy prices for Nigeria, where higher petrol costs have increased transportation expenses, contributed to inflationary pressures and renewed calls for government intervention.
According to the IMF official, broad fuel subsidies are fiscally expensive and often regressive because higher-income households generally consume more fuel and consequently receive a larger share of the benefits.
He disclosed that measures adopted by countries to prevent energy prices from fully reflecting market shocks had cost between 1 and 1.5 per cent of gross domestic product (GDP) in 2026.
Valdés maintained that such expenditure could further weaken public finances at a time when governments are contending with rising debt obligations and higher borrowing costs.
He recommended strengthening social safety nets and using reliable household data to identify those most affected by rising prices, rather than extending financial support indiscriminately to all fuel consumers.
The position reinforces findings published by the IMF on October 6, which indicated that providing comparable protection to low-income households through consumer subsidies could require three to six times the fiscal resources needed for targeted cash transfers.
The Fund argued that direct assistance would allow governments to protect household purchasing power while preserving limited public resources and maintaining market signals necessary for efficient energy consumption.
The warning comes amid renewed debate over Nigeria’s petrol pricing framework, following the removal of the subsidy in May 2023 and subsequent increases in fuel prices.
In response to the latest energy price pressures, the Federal Government recently announced temporary relief measures, including discounted petrol sales at Nigerian National Petroleum Company (NNPC) Limited retail outlets, with particular attention to commercial transport operators.
NNPC subsequently clarified that its discount arrangement, which will run until October 31, 2026, does not constitute a return to the former petrol subsidy regime.
The company explained that the initiative was intended to ease the financial burden on consumers without reversing the market-based pricing structure.
The Federal Government has also outlined plans to expand cash transfers to vulnerable households and accelerate the adoption of compressed natural gas (CNG) as part of broader efforts to reduce transportation costs.
The IMF’s latest intervention places renewed emphasis on the challenge facing policymakers: providing meaningful relief to Nigerians affected by high fuel prices without creating additional long-term fiscal obligations.
With pressure mounting on household incomes, the effectiveness of the government’s response will depend increasingly on how quickly its proposed interventions translate into measurable relief for those most affected.
