The International Monetary Fund (IMF) has urged the Federal Government to resist calls to restore a broad petrol subsidy, recommending targeted assistance for vulnerable Nigerians to ease the impact of rising fuel prices.
The fund warned that blanket subsidies would place additional pressure on public finances while disproportionately benefiting higher-income earners.
Rodrigo Valdés, Director of the IMF’s Fiscal Affairs Department, gave the advice during a briefing on the fund’s Fiscal Monitor at the 2026 annual meetings of the IMF and World Bank in Bangkok, Thailand, on Wednesday.
His remarks came amid concerns that rising petrol prices could increase transport fares, worsen inflation and deepen poverty, as pressure mounts on the government to restore the subsidy ahead of the 2027 general election.
“Protecting people is not the same as protecting the price of fuels,” Valdés said, arguing that governments should prioritise assistance for households most affected by rising energy costs rather than suppressing fuel prices for everyone.
He said fuel subsidies and other measures that prevented energy prices from adjusting fully to supply shocks had cost countries between one and 1.5 per cent of gross domestic product in 2026.
“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.
Valdés urged governments to deploy social safety nets and household data to identify those who genuinely needed support.
“There are better tools to deal with this,” he added.
The IMF also advised Nigeria and other countries to consider subsidising public transport and introducing other targeted interventions instead of providing blanket relief on petrol prices.
Davide Furceri, a division chief in the fund’s Fiscal Affairs Department, said governments could redirect resources spent on universal fuel subsidies towards measures that offered greater benefits to vulnerable groups.
“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 recommended school feeding programmes, geographically targeted assistance and support for vulnerable farmers.
Furceri acknowledged that some countries lacked 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 more effective systems.
He stressed that any intervention should be limited, targeted and temporary.
Valdés further warned that blanket fuel subsidies could aggravate global energy pressures by preventing consumers from adjusting their demand 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, suppressing prices in one market could force other consumers to absorb a greater share of the adjustment, pushing market prices higher.
The IMF’s position comes as the Federal Government pursues temporary measures to cushion Nigerians against rising petrol prices.
The government recently announced a 30-day petrol discount at Nigerian National Petroleum Company (NNPC) Limited retail outlets, with priority for public transport operators.
The Minister of Finance, Taiwo Oyedele, said NNPC retail would sell petrol at cost by foregoing its retail profit margin, describing the arrangement as temporary relief rather than a return to the subsidy regime.
The government also proposed negotiating a ceiling of N1,350 per litre on petrol’s ex-gantry or landing cost, subject to monthly reviews.
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