The International Monetary Fund (IMF) has advised the Federal Government against restoring a blanket petrol subsidy, recommending targeted assistance for vulnerable households to cushion the impact of rising fuel prices.
The Fund warned that broad fuel subsidies were expensive, often benefited higher-income consumers disproportionately and could worsen pressure on public finances amid rising borrowing costs.
Rodrigo Valdés, director of the IMF’s Fiscal Affairs Department, gave the advice on Wednesday during a press briefing on the Fund’s Fiscal Monitor at the 2026 IMF/World Bank Annual Meetings in Bangkok, Thailand.
Valdés was responding to a question about the impact of allowing energy prices to reflect supply constraints, particularly in Nigeria, where higher petrol prices could increase transport fares, fuel inflation and deepen poverty.
He noted that these challenges had intensified calls for the government to restore petrol subsidies ahead of an election year.
“Protecting people is not the same as protecting the price of fuels,” Valdés said.
He explained that fuel subsidies and other measures preventing 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 use social safety nets and household data to identify citizens who needed assistance instead of subsidising fuel prices for everyone.
“There are better tools to deal with this,” he added.
The Federal Government recently announced a 30-day petrol discount at Nigerian National Petroleum Company Limited retail stations, with priority given to public transport operators, as part of efforts to ease the impact of rising fuel costs.
Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said NNPC retail stations would sell petrol at cost by foregoing their retail profit margins.
He described the measure as temporary relief rather than a return to petrol subsidy.
The government also proposed negotiating a ceiling of ₦1,350 per litre on petrol’s ex-gantry or landing cost, subject to monthly reviews.
The IMF also recommended targeted measures to reduce the impact of higher fuel prices on transportation and other essential household expenses.
Davide Furceri, a division chief in the Fund’s Fiscal Affairs Department, said governments could redirect some of the resources previously spent on blanket subsidies towards vulnerable consumers.
He suggested subsidising public transport fares as a more targeted way of protecting households from rising petrol prices.
“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 comprehensive household registries and digital payment systems needed to deliver targeted support effectively.
However, he said governments could adopt alternative approaches in the short term while developing stronger systems to identify and assist those most in need.
He stressed that any assistance should be limited, targeted and temporary.
Valdés warned that fuel subsidies could worsen global energy pressures by preventing consumers from adjusting their demand when supplies were limited.
“When you subsidise, you don’t allow, at the end of the day, demand to adjust,” he said.
He explained that when less fuel was available in the global economy, artificially sustaining demand meant that other consumers would have to absorb more of the adjustment, potentially pushing market prices higher.
The IMF official maintained that blanket fuel subsidies were not only costly and disproportionately beneficial to higher-income consumers but could also have wider effects on the global economy.
The Fund’s position is that governments should protect vulnerable people directly rather than attempt to shield all consumers from changes in fuel prices.
