IMF Warns Nigeria Against Restoring Petrol Subsidy

By Adedapo Adesanya

The International Monetary Fund (IMF) has warned the federal government against restoring a broad petrol subsidy, urging it to adopt targeted support measures to protect vulnerable households from rising energy costs as the debate over fuel affordability intensifies ahead of the 2027 general elections.

The fund said blanket fuel subsidies are expensive, often benefit higher-income consumers disproportionately and worsen fiscal pressures, particularly amid rising borrowing costs.

The Director of the IMF’s Fiscal Affairs Department, Mr Rodrigo Valdés, made the remarks during a press briefing on the Fiscal Monitor at the 2026 IMF and World Bank Annual Meetings in Bangkok.

His comments come amid renewed calls by former Vice President, Mr Atiku Abubakar, for the restoration of petrol subsidies, as well as criticism of the federal government’s recently announced 30-day petrol discount at Nigerian National Petroleum Company Limited retail stations.

Mr Atiku, the presidential candidate of the African Democratic Congress (ADC), has maintained that he would restore a targeted subsidy if elected president in 2027, arguing that rising fuel prices have eroded household purchasing power, increased transportation costs and contributed to higher food prices.

However, he has distinguished his proposal from the previous subsidy regime, which relied heavily on imported petrol, saying government support should instead be directed towards domestically refined petroleum products.

His proposal includes a capped, transparently budgeted and independently audited intervention tied to local production, with the stated objective of lowering energy costs, supporting domestic refining and improving consumers’ purchasing power.

On October 9, the ex-VP criticised the federal government’s 30-day petrol discount, questioning whether the temporary measure would provide lasting relief for Nigerians after it expires.

He argued that a short-term discount would not resolve the underlying pressures driving transportation fares and food prices, and called for more sustainable measures to reduce the cost of living.

Responding to concerns that allowing fuel prices to reflect market conditions could raise transport costs, worsen inflation and deepen poverty in Nigeria, Mr Valdés said protecting citizens should not be confused with keeping fuel prices artificially low.

“Protecting people is not the same as protecting the price of fuels,” he said.

According to the IMF official, fuel subsidies and other measures that prevent energy prices from fully adjusting to supply shocks cost countries between one and 1.5 per cent of gross domestic product (GDP) in 2026.

He recommended that governments use social safety nets and household data to identify people most affected by rising energy costs and direct assistance to them rather than subsidising fuel prices across the board.

The IMF’s position highlights the fiscal risks associated with broad-based subsidies at a time when governments face pressure to cushion households from higher energy costs without increasing public expenditure beyond sustainable levels.

President Bola Tinubu removed the petrol subsidy in May 2023, a policy shift that led to higher pump prices and intensified pressure on transport costs, food prices and household budgets.

However, the reform has remained contentious because of the gap between the government’s fiscal objectives and the immediate financial burden on consumers.

The federal government recently announced a 30-day petrol discount at NNPC retail stations, prioritising public transport operators. Finance Minister and Coordinating Minister of the Economy, Mr Taiwo Oyedele, described the arrangement as a sale of petrol at cost rather than a restoration of the subsidy regime.

The intervention has nevertheless attracted criticism over its duration, reach and potential impact on transport fares, with Atiku arguing that temporary relief would not adequately address the wider cost-of-living crisis.