By Joy Yesufu
The International Monetary Fund (IMF) has advised Nigeria against restoring broad petrol subsidies, urging the Federal Government to adopt targeted support measures to protect vulnerable households from rising fuel and transportation costs.
The fund warned that blanket fuel subsidies were expensive, often disproportionately benefited higher-income consumers and could worsen fiscal pressures at a time of rising borrowing costs.
Rodrigo Valdés, director of the IMF’s Fiscal Affairs Department, gave the advice during a press briefing on the fund’s Fiscal Monitor at the 2026 IMF-World Bank Annual Meetings in Bangkok, Thailand, on Wednesday.
Responding to a question about the impact of higher fuel prices on transportation costs, inflation and poverty in Nigeria, Valdés said governments should focus on protecting vulnerable people rather than keeping fuel prices artificially low.
“Protecting people is not the same as protecting the price of fuels,” he said.
Valdés said measures designed to prevent energy prices from reflecting supply constraints had cost countries between one and 1.5 per cent of gross domestic product in 2026.
He argued that such subsidies were not only fiscally burdensome but could also disproportionately benefit wealthier consumers, who generally spend more on fuel.
“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.
Instead, he urged governments to use social safety nets and household data to identify those most in need of assistance.
“There are better tools to deal with this,” he said.
The IMF’s position comes amid renewed debate over petrol prices in Nigeria, where the Federal Government recently announced a 30-day petrol discount at Nigerian National Petroleum Company Limited (NNPC Ltd) retail outlets, with priority for public transport operators.
The Minister of Finance, Taiwo Oyedele, said NNPC Ltd would forgo its retail profit margin to provide temporary relief to consumers, insisting that the arrangement was a discount rather than a return to petrol subsidy.
The government also proposed negotiating a ceiling of N1,350 per litre on petrol’s ex-gantry or landing cost, subject to monthly reviews.
The IMF recommended that governments facing higher fuel prices consider more direct ways of easing the burden on vulnerable households, including targeted assistance for public transportation.
Davide Furceri, a division chief in the fund’s Fiscal Affairs Department, said governments could redirect some of the resources used for blanket fuel subsidies towards measures that benefit people most affected by rising costs.
“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,” Furceri said.
He also suggested school-feeding programmes, geographically targeted assistance and support for vulnerable farmers as alternatives to broad fuel subsidies.
Furceri acknowledged that some countries lacked comprehensive household registries and digital payment systems needed to deliver targeted assistance effectively.
However, he said governments could adopt alternative arrangements in the short term while developing stronger systems for identifying and supporting vulnerable populations.
He stressed that assistance should be limited, targeted and temporary.
Valdés also warned that broad fuel subsidies could intensify pressure on global energy markets by preventing demand from adjusting when supplies were constrained.
“When you subsidise, you don’t allow, at the end of the day, demand to adjust,” he said.
He added that when less fuel was available in the global economy, artificially sustaining demand could force other consumers to absorb a greater share of the adjustment, contributing to higher market prices.
The IMF official maintained that broad subsidies were costly, could disproportionately benefit wealthier consumers and could create spillover effects across the global economy.
