The International Monetary Fund has warned Nigeria against reinstating blanket petrol subsidies amid mounting political pressure ahead of the elections, saying the Federal Government should instead prioritize financial assistance to vulnerable households struggling with rising energy costs.
The Director of the IMF’s Fiscal Affairs Department, Rodrigo Valdés, gave the warning on Wednesday during the IMF and World Bank Group Annual Meetings in Bangkok, Thailand.
Responding to a question on growing demands for the restoration of petrol subsidies in Nigeria ahead of the elections, Valdés acknowledged that rising fuel prices could create political difficulties for governments but cautioned that subsidising consumption across the board would impose substantial costs on public finances.
He said, “At the end of the day, it’s very tempting politically speaking because it’s not trivial the political effect of the price of oil, of fuels, of gasoline, of diesel.
“But you have to explain that this is a global shock, first. Second, that it’s very, very expensive for the country not to recognise that shock.
“And third, it’s much better to use some of that money that would be spent in the subsidies channelled towards more vulnerable people.”
The IMF official maintained that governments could achieve better outcomes by directing limited public resources towards households facing the greatest financial hardship rather than subsidising petrol for all consumers, irrespective of income.
He identified transportation subsidies as a possible alternative to broad fuel price interventions.
