The International Monetary Fund (IMF) has warned Nigeria against bringing back broad petrol subsidies, urging the government to support vulnerable households directly as fuel prices rise.
Rodrigo Valdés, director of the IMF’s Fiscal Affairs Department, gave the advice on Wednesday during a briefing on the fund’s Fiscal Monitor at the 2026 IMF and World Bank annual meetings in Bangkok, Thailand.
He was responding to concerns that higher petrol prices could raise transport costs, fuel inflation and worsen poverty, amid calls to restore subsidies before the 2027 general elections.
“Protecting people is not the same as protecting the price of fuels,” Valdés said.
He noted that fuel subsidies and other measures stopping energy prices from adjusting 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 use household data and social safety nets to identify those who need help. “There are better tools to deal with this,” he said.
Nigeria recently announced a 30-day petrol discount at NNPC retail stations, prioritising public transport operators. Finance Minister Taiwo Oyedele said the outlets would sell petrol at cost by giving up retail profit margins. He described the move as temporary relief, not a return to subsidies.
The government also proposed negotiating a N1,350-per-litre ceiling on petrol’s ex-gantry or landing cost, subject to monthly reviews.
Davide Furceri, an IMF division chief, recommended targeted transport support, including subsidised bus fares instead of cheaper fuel for everyone.
He also suggested school feeding, location-based support and aid for vulnerable farmers. Although some countries lack household records and digital payment systems, he said alternatives could be used while stronger systems are developed.
Furceri stressed that assistance should be limited, targeted and temporary.
Valdés warned that cheap fuel encourages consumption when global supplies are tight, pushing prices higher.
“When you subsidise, you don’t allow, at the end of the day, demand to adjust,” he said.
“And reality is that we have less fuels in the world economy. That means that someone else has to adjust more, and the market produces a higher price for that.”
