IMF urges Nigeria to replace universal fuel subsidy with targeted aid

IMF advice at Bangkok meetings During the 2026 IMF and World Bank annual gatherings in Bangkok, the fund’s Fiscal Affairs Director, Rodrigo Valdés, warned the Nigerian government that reinstating a universal petrol subsidy would place a heavy strain on public finances. He explained that such subsidies typically cost between one and 1.5 percent of a country’s gross domestic product and tend to benefit higher‑income consumers who use more fuel, making the policy regressive.

Preference for targeted assistance Valdés and other IMF officials, including fiscal division chief Davide Furceri, recommended that Nigeria direct resources toward social safety nets and data‑driven programmes that reach the most affected households. The fund suggested that, rather than keeping fuel prices artificially low for all, the government could subsidise related costs such as public‑transport fares, which would provide relief to those most dependent on affordable mobility.

Political context and upcoming elections The advice came amid growing domestic pressure to lower fuel prices ahead of the 2027 general elections. While acknowledging the political appeal of cheap petrol, the IMF stressed that the underlying global energy shock makes broad subsidies unsustainable. According to reports from Punch and ThisDay, the IMF highlighted the need for policymakers to balance short‑term household needs with medium‑term fiscal stability.

Government’s interim measures In response to the rising cost of energy, the Nigerian federal government announced a temporary 30‑day discount at Nigerian National Petroleum Company (NNPC) retail stations, prioritising public‑transport operators. Finance Minister Taiwo Oyedele described the measure as a short‑term relief that involves selling fuel at cost by forgoing the usual retail margin. The administration also floated the idea of setting a ceiling of N1,350 per litre for the ex‑gantry price, subject to monthly reviews, as a way to moderate price spikes without reinstating a full subsidy.

Outlook The IMF’s stance underscores its broader assessment that, although Nigeria’s economy has shown notable progress, the benefits of growth remain unevenly distributed. By urging a shift from blanket subsidies to more precise support mechanisms, the fund aims to protect vulnerable groups while preserving fiscal space amid rising borrowing costs. The Nigerian government’s forthcoming decisions on fuel pricing and social assistance will likely be closely watched by both domestic stakeholders and international partners.