The International Monetary Fund (IMF) has cautioned the Federal Government against reinstating a broad petrol subsidy, urging authorities to prioritise direct financial assistance and other targeted interventions for vulnerable Nigerians amid rising energy costs.
The global financial institution said a blanket fuel subsidy could place additional pressure on government finances while disproportionately benefiting wealthier consumers who generally purchase more fuel.
Rodrigo Valdés, director of the IMF’s Fiscal Affairs Department, stated this during a press briefing on the fund’s Fiscal Monitor at the 2026 annual meetings of the IMF and World Bank in Bangkok, Thailand, on Wednesday.
Valdés was responding to concerns that allowing petrol 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 restore subsidies ahead of the 2027 general elections.
He maintained that protecting citizens from the consequences of rising energy prices should not necessarily mean keeping fuel prices artificially low.
“Protecting people is not the same as protecting the price of fuels,” Valdés said.
According to him, fuel subsidies and measures designed to prevent energy prices from adjusting fully to market shocks cost countries between one and 1.5 per cent of gross domestic product in 2026.
He warned that such spending could worsen fiscal challenges, especially for countries already facing high borrowing costs and competing demands for public expenditure.
The IMF official instead recommended the use of social safety nets and reliable household data to identify Nigerians who require support, arguing that targeted interventions would provide more effective relief without imposing the financial burden associated with universal subsidies.
“There are better tools to deal with this,” he said.
The recommendation comes as the Federal Government recently announced a 30-day petrol discount at Nigerian National Petroleum Company Limited retail outlets, with public transport operators prioritised as part of efforts to ease the impact of rising fuel prices.
The debate over petrol subsidy policy remains a significant economic and political issue in Nigeria, where higher fuel costs have contributed to increased transportation expenses and pressure on household budgets.
While the IMF is advocating targeted assistance rather than a return to broad subsidies, the effectiveness of any alternative will depend on the government’s ability to identify eligible beneficiaries, deliver support transparently and ensure that vulnerable households receive timely relief.
