The International Monetary Fund (IMF) has urged the Federal Government to avoid restoring blanket petrol subsidies, recommending targeted support for vulnerable households as rising energy costs put pressure on consumers.
The fund warned that broad fuel subsidies are costly, often benefit wealthier consumers disproportionately and could worsen government finances amid rising borrowing costs.
Rodrigo Valdés, director of the IMF’s Fiscal Affairs Department, made the recommendation on Wednesday during a briefing on the fund’s Fiscal Monitor at the 2026 IMF-World Bank Group Annual Meetings in Bangkok, Thailand.
Responding to concerns that higher energy prices could increase transport fares, fuel inflation and deepen poverty in Nigeria, particularly amid calls to restore petrol subsidies ahead of an election year, Valdés said governments should protect people rather than artificially suppress fuel prices.
“Protecting people is not the same as protecting the price of fuels,” he said.
Valdés disclosed that fuel subsidies and other measures preventing prices from adjusting fully to energy shocks had cost countries between one and 1.5 per cent of gross domestic product (GDP) in 2026.
“It’s first fiscally very costly, and second, if you look at the pattern of consumption, it’s easy to see that that subsidy is readily regressive in many places,” he said.
He recommended using social safety nets and household data to identify those most in need of assistance, adding, “There are better tools to deal with this.”
Davide Furceri, a division chief in the IMF’s Fiscal Affairs Department, also called for resources spent on universal subsidies to be redirected towards targeted relief.
Using transportation as an example, Furceri said subsidising bus fares could provide more effective assistance than lowering petrol prices for all consumers.
“For example, you mentioned transportation costs. Yeah, gasoline could go up, and perhaps bus fees may be subsidised in a way that is a much better policy at the end of the day than just a blanket subsidy for everybody,” he said.
He also suggested school feeding programmes, geographically targeted interventions and assistance for vulnerable farmers as alternatives to universal fuel subsidies.
Although Furceri acknowledged that some countries lacked household registries and digital payment systems needed to distribute targeted assistance effectively, he said governments could introduce alternative short-term measures while strengthening their delivery systems.
He stressed that such interventions should be limited, targeted and temporary.
Valdés also warned that fuel subsidies could intensify global energy pressures by preventing demand from responding to supply shortages.
“When you subsidise, you don’t allow, at the end of the day, demand to adjust,” he said.
“And reality is that we have less fuels in the world economy. That means that someone else has to adjust more, and the market produces a higher price for that.”
Meanwhile, the Federal Government recently announced a 30-day petrol discount at Nigerian National Petroleum Company (NNPC) Limited retail stations, with priority given to public transport operators to cushion the impact of rising fuel prices.
Finance Minister Taiwo Oyedele said NNPC retail outlets would sell petrol at cost by waiving their retail profit margins, describing the measure as temporary relief rather than a return to fuel subsidies.
The government also proposed negotiating a ceiling of ₦1,350 per litre for petrol’s ex-gantry or landing cost, subject to monthly reviews.
