The International Monetary Fund (IMF) has urged the Federal Government to channel savings from subsidy reforms into targeted social protection programmes for poor and vulnerable Nigerians as the country continues to grapple with high living costs.
The fund said subsidy removal would achieve better results if the resources saved were used to support households most affected by rising energy prices and inflation, rather than funding broad interventions that also benefit wealthier citizens.
Zeine Zeidane, Director of the IMF’s African Department, gave the advice on Thursday during the presentation of the fund’s Regional Economic Outlook Update for sub-Saharan Africa, held on the sidelines of the World Bank and IMF annual meetings in Bangkok, Thailand.
Responding to questions about the tensions surrounding subsidy removal in Nigeria and other African countries, Zeidane said governments should place greater emphasis on social protection, particularly for the most vulnerable sections of society.
“Our advice in many places has been to phase these subsidies gradually, and make sure that what you save from the subsidy reform is well targeted to those who actually need it,” he said.
He argued that energy subsidies often disproportionately benefit wealthier households while placing pressure on government finances and, in oil-importing countries, increasing the cost of imports.
“It’s better to support people who need support than supporting product that actually can affect both your fiscal position but also, for oil importers, for example, the level of import bill that you have,” he said.
The IMF’s comments come as Nigeria continues to implement economic reforms, including changes to the foreign exchange market, the removal of petrol subsidies and tax reforms. The government has defended the policies as necessary to address structural weaknesses and ease fiscal pressures.
However, the measures have contributed to public discontent over rising petrol prices, transport costs and the broader cost-of-living crisis, despite support for the reforms from international financial institutions concerned about Nigeria’s fiscal position.
Zeidane said the IMF’s advice was not limited to Nigeria, stressing that social spending and targeted assistance remained important components of the fund’s programmes across countries.
On monetary policy, he said Nigeria had made significant progress towards reducing inflation, although it was coming down from a high level and interest rates remained elevated.
The IMF also urged the government to strengthen domestic revenue mobilisation beyond the oil sector to create more fiscal space for essential public spending on education, healthcare and infrastructure.
It advised Nigeria to continue structural reforms aimed at improving the business environment and making the private sector more effective in generating growth and employment.
Zeidane described Nigeria as a country with considerable economic potential, citing its large market, young entrepreneurs and technology-savvy population as attractions for private investment.
“Nigeria is a country that has a lot of dynamism, a lot of young entrepreneurs, young tech-savvy population. So it’s a large market, very attractive for private investment in general,” he said.
He added that reforms to governance, the business environment and economic integration could accelerate growth and create jobs.
In its regional outlook, the IMF projected that sub-Saharan Africa’s economy would grow by 4.5 per cent in both 2026 and 2027.
The fund said global supply adjustments, favourable export receipts in some countries and earlier reforms had helped cushion the region against the economic shock from the conflict in the Middle East.
However, it warned that the regional growth projection masked significant differences between countries, with growth slowing in economies less dependent on natural resources while resource-intensive economies remained relatively resilient.
The report said fiscal adjustments made before the conflict and declining debt ratios were important achievements, but high interest payments, low foreign reserves in many countries and declining aid had left governments with limited room to absorb further shocks.
It warned that risks remained tilted towards weaker growth and urged governments to sustain necessary fiscal adjustments, save temporary commodity windfalls, direct support to vulnerable households and contain persistent inflation.
The IMF also stressed that protecting productive investment and creating conditions for private-sector growth would help countries withstand future shocks, strengthen their economies and improve living standards over the longer term.
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