The International Monetary Fund has urged the Federal Government to resist calls to reinstate a general petrol subsidy, recommending targeted assistance for vulnerable households affected by rising energy and transportation costs.
The fund said broad-based fuel subsidies place a significant burden on public finances, disproportionately benefit wealthier consumers and discourage adjustments in fuel consumption when global supplies are constrained.
The Director of the IMF’s Fiscal Affairs Department, Rodrigo Valdés, made the recommendation 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.
Responding to concerns that higher petrol prices could increase transportation costs, fuel inflation and worsen poverty in Nigeria, particularly ahead of an election year, Valdés said protecting citizens should not be confused with keeping fuel prices artificially low.
“Protecting people is not the same as protecting the price of fuels,” he said.
Valdés added that measures preventing energy prices from responding fully to supply shocks had cost countries between one and 1.5 per cent of their gross domestic product in 2026.
He described general fuel subsidies as financially burdensome and regressive, noting that higher-income consumers often benefit disproportionately because they typically consume more fuel.
“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.
The IMF official urged governments to use social safety nets and household data to identify people who require support rather than subsidising fuel prices for everyone.
“There are better tools to deal with this,” he added.
The recommendation comes as the Federal Government pursues measures to ease the burden of rising petrol prices on Nigerians.
The government recently announced a 30-day petrol discount at Nigerian National Petroleum Company Limited retail outlets, with priority given to public transport operators.
The Minister of Finance, Taiwo Oyedele, said the arrangement would allow NNPC retail stations to sell petrol at cost by foregoing their retail profit margin. He described the initiative as temporary relief rather than a return to the petrol subsidy regime.
The government has also proposed negotiating a ceiling of N1,350 per litre on petrol’s ex-gantry or landing cost, subject to monthly reviews.
Meanwhile, another IMF official, Davide Furceri, called for governments to redirect some of the resources previously spent on general fuel subsidies towards programmes that directly benefit vulnerable populations.
Furceri, a division chief in the fund’s Fiscal Affairs Department, said targeted interventions could help cushion the impact of higher fuel prices on transportation and household expenses.
“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,” he said.
He also recommended interventions such as school feeding programmes, geographically targeted assistance and support for vulnerable farmers.
Although Furceri acknowledged that some countries lacked comprehensive household databases and digital payment systems for delivering targeted assistance, he said governments could adopt alternative measures while developing the necessary infrastructure.
He stressed that such interventions should be limited, directed at those who need them most and temporary.
Valdés further argued that broad fuel subsidies could intensify pressure on global energy markets by preventing consumers from reducing demand when supplies decline.
“When you subsidise, you don’t allow, at the end of the day, demand to adjust,” he said.
He explained that when less fuel is available in the global economy, sustained demand in one market could force other consumers to make larger adjustments and contribute to higher prices.
“That means that someone else has to adjust more, and the market produces a higher price for that,” he added.
The IMF maintained that targeted support would provide a more sustainable way to protect vulnerable households while reducing fiscal pressures and allowing energy demand to respond to supply constraints.
