IMF warns Nigeria against restoring petrol subsidy

The International Monetary Fund (IMF) has advised the Federal government against restoring a broad petrol subsidy, recommending targeted support for vulnerable households to cushion the impact of rising energy costs.

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

Valdes said blanket petrol subsidies are expensive, often benefit higher-income consumers disproportionately, and worsen fiscal pressures amid rising borrowing costs.

His comments followed a question about how the Fund could recommend allowing energy prices to reflect scarcity when higher fuel prices in Nigeria could raise transport costs, worsen inflation, and deepen poverty, particularly as the government faces calls to restore the petrol subsidy ahead of an election year.

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

He said fuel subsidies or measures that prevented prices from fully adjusting to an energy shock had cost countries between 1 per cent and 1.5 per cent of gross domestic product (GDP) in 2026.

He said the government should instead use social safety nets and household data to identify people who need assistance.

The Federal Government recently announced a 30-day petrol discount at Nigerian National Petroleum Company (NNPC) Limited retail stations, with priority for public transport operators, to cushion the impact of rising fuel prices.