IMF ADVISES NIGERIA AGAINST RESTORING PETROL SUBSIDY

The International Monetary Fund has advised Nigeria against restoring blanket petrol subsidy, urging the Federal Government to channel support towards vulnerable citizens as rising energy costs put pressure on households ahead of the 2027 general elections.

The IMF Nigeria blanket petrol subsidy warning was delivered on Wednesday by the Director of the IMF’s Fiscal Affairs Department, Rodrigo Valdés, during the IMF and World Bank Group annual meetings in Bangkok, Thailand, in response to questions about growing calls for the return of petrol subsidies in Nigeria.

THE IMF’S ADVICE

Valdés acknowledged the political pressure governments face when fuel prices rise but said blanket subsidies were costly and that available resources would be better used to support people most affected by higher energy prices.

“At the end of the day, it’s very tempting politically speaking because it’s not trivial the political effect of the price of oil, of fuels, of gasoline, of diesel,” he said.

“But you have to explain that this is a global shock, first. Second, that it’s very, very expensive for the country not to recognise that shock.”

“And third, it’s much better to use some of that money that you would spend in the subsidies channeled towards more vulnerable people.”

He added that targeted support was preferable to a blanket subsidy, saying: “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.”

Valdés also warned that broad subsidies could aggravate global energy pressures by discouraging consumers from adjusting their demand when fuel supplies decline.

“When you subsidise, you don’t allow, at the end of the day, demand to adjust. 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,” he said.

A division chief in the fund’s Fiscal Affairs Department, Davide Furceri, suggested that governments could redirect resources from blanket subsidies towards support for public transport users and other vulnerable groups.

He also suggested measures such as school feeding programmes, geographical targeting and assistance for vulnerable farmers.

Furceri acknowledged that some countries lacked household registries and digital payment systems needed to deliver targeted assistance effectively but said governments could adopt alternative approaches while developing stronger systems.

He recommended that support should be limited, targeted and temporary.

THE NIGERIAN CONTEXT

The IMF’s advice comes as Nigeria faces renewed pressure over petrol prices following increases in global energy costs.

The Federal Government recently announced a 30-day petrol discount at Nigerian National Petroleum Company (NNPC) Limited retail stations, with priority for public transport operators, to cushion the impact on consumers.

Finance Minister Taiwo Oyedele said NNPC retail would sell petrol at cost by foregoing its retail profit margin, describing the measure as temporary relief rather than a return to petrol subsidy.

The government has also proposed negotiating a ceiling of ₦1,350 per litre on petrol’s ex-gantry or landing cost, subject to monthly reviews .The Presidency has insisted that none of the measures restores a blanket subsidy.

“To be clear, none of these measures restores a blanket subsidy. Doing so would create longer-term harm for a short-term cure. Each measure is designed to reach the people who need help, without putting the wider economy at risk,” the Presidency said in a statement.

Oyedele has warned that reinstating subsidy could push the exchange rate to ₦3,000 to the dollar and petrol to at least ₦2,000 per litre.

“Our estimate is that the exchange rate could approach ₦3,000 to the dollar within months, and so-called subsidised petrol would cost at least ₦2,000 a litre. That is well above what Nigerians pay today,” he said.

“A subsidy does not lower the cost of fuel. It only changes how it is paid and when. Nigerians have paid that bill before, in scarcity, in inflation and in a collapsing currency.”

THE POLITICAL DIMENSION

The subsidy debate has become a central issue in the lead-up to the 2027 general elections.

ADC presidential candidate Atiku Abubakar has proposed what he calls a “capped, budgeted production subsidy tied to verified fuel refined in Nigeria only,” excluding imported petrol.

He said costs would be published, payments independently audited and government waste cut, with benefits passed to consumers through lower pump prices.

The ADC has demanded that the Tinubu administration account for the N15.8 trillion in additional resources reportedly generated following subsidy removal, arguing that the economic gains claimed by the government have not translated into improved welfare for citizens.

“The contradiction is impossible to ignore. Government is counting trillions while Nigerian families are counting the meals they can afford,” the party said .

The Presidency has dismissed Atiku’s subsidy plan as “a dangerous mathematical fantasy wrapped in political deceit,” citing the crude shortfall — the gap between what Nigeria produces and what the Federal Government owns after joint venture and production sharing obligations are accounted for.

THE SAP PARALLEL: A HISTORY OF EXTERNAL ADVICE

The IMF’s advice on subsidy is not new. It is part of a long tradition of external prescriptions that have shaped Nigeria’s economic policy for nearly four decades.

In 1986, Nigeria adopted the Structural Adjustment Programme under pressure from the World Bank and the IMF.

The programme was presented as a necessary response to the economic crisis of the early 1980s, when oil prices collapsed and Nigeria’s external debt became unsustainable.

SAP’s core elements were familiar: devaluation of the naira, removal of subsidies, trade liberalisation, privatisation of state enterprises, and reduction of government spending. The logic was that market forces, if unleashed, would allocate resources more efficiently and stimulate growth.

The reality was different.

The naira was devalued repeatedly. The official exchange rate moved from ₦0.618 to the dollar in 1981 to ₦17.298 by 1992. The parallel market rate moved from ₦0.925 to ₦21.070 over the same period.

Inflation soared. Real incomes collapsed. The middle class was decimated. The structural weaknesses that SAP was meant to address, dependence on oil exports, weak manufacturing, inadequate infrastructure, persisted.

More than three decades later, the debate over SAP’s legacy remains unresolved.

Critics argue that the programme prioritised the interests of external creditors over the welfare of Nigerians. Supporters counter that without SAP, the economy would have collapsed entirely.

What is clear is that SAP’s promises of prosperity did not materialise for most Nigerians. The adjustment was real. The development was not.

THE REPEATING PATTERN

The IMF’s advice on petrol subsidy echoes the SAP era in more ways than one.

Both involve external institutions advising Nigeria to remove subsidies and allow market forces to determine prices. Both are justified by fiscal sustainability concerns. Both are presented as necessary for long-term growth.

And both have been criticised for failing to account for the immediate human costs.

A 2026 academic analysis in the University of Nigeria Journal of Political Economy argued that the removal of petrol subsidy in 2023, which the World Bank and IMF praised, deepened poverty in Nigeria and undermined the progressive ideal of “allowing the poor to breathe” that formed the core of Tinubu’s election campaign.

The study contended that the policy switch from the progressive ideal to subsidy removal, without first increasing Nigeria’s downstream sector capacity, teflected a desire to kowtow to the policy prescriptions of the World Bank and IMF rather than securing the living conditions of vulnerable Nigerians.

A Punch editorial from October 2026 captured the paradox starkly: “Nigeria is currently a ludicrous paradox: richer state, poorer citizens, treasury fattened at the cost of human survival”.

The editorial noted that government revenues had increased substantially, over N15.8 trillion in additional resources from subsidy removal, FAAC allocations swelling by more than 130 per cent, while poverty deepened and purchasing power collapsed.

It compared Nigeria’s approach unfavourably with advanced economies that introduced targeted relief during energy crises: France capped electricity prices and offered fuel discounts; Spain subsidised public transport; the UK provided direct payments to households; the US deployed stimulus checks and energy credits.

THE NEED FOR DOMESTICATION

The central lesson from SAP and its aftermath is that external advice, however technically sound, must be domesticated to local conditions.

The IMF’s argument against blanket subsidies is not without merit.

Blanket subsidies are regressive: they benefit higher-income consumers who consume more fuel. They distort markets, create opportunities for arbitrage and smuggling, and impose fiscal burdens that crowd out spending on health, education and infrastructure.

But the IMF’s alternative, targeted support for vulnerable citizens, presumes the existence of institutions capable of identifying those citizens and delivering assistance to them efficiently.

Does Nigeria have a functioning social registry? The cash transfer programmes of successive administrations have been plagued by allegations of political manipulation, ghost beneficiaries and payment failures.

The ADC has asked how 10 million recipients of ₦75,000 were identified and paid, demanding accountability for the programme.

Does Nigeria have the digital infrastructure to deliver targeted support at scale? Millions of Nigerians remain outside the formal financial system. Many lack bank accounts, phone numbers linked to identity systems, or addresses that can be verified.

n the absence of these institutions, targeted support can become a slogan rather than a policy, an aspiration that never reaches the people it is meant to help.

The IMF itself acknowledged this challenge. Furceri conceded that some countries lacked household registries and digital payment systems needed to deliver targeted assistance effectively, but said governments could adopt alternative approaches while developing stronger systems.

That is a reasonable position. But it leaves unanswered the question of what happens in the interim, the period during which the systems are being built while people are struggling to afford fuel for their vehicles and transport for their families.

THE POLITICAL CALCULUS

The IMF’s advice is technically sound but politically fraught.In advanced economies, targeted support is feasible because the institutions exist.

In Nigeria, the institutions are weak or non-existent. The result is that “targeted support” becomes a promise that is difficult to deliver, while “blanket subsidy” is a tangible benefit that people can feel immediately.

This is the political reality that the IMF’s advice does not fully address. Governments that remove subsidies and promise targeted support in return often find that the support does not materialise, while the price increases do.

The result is political backlash and, often, a partial restoration of the subsidy.

The Tinubu administration has tried to navigate this by maintaining the subsidy removal while introducing temporary measures like the NNPC discount. Whether this approach can be sustained through the 2027 election remains to be seen.

A BALANCED APPROACH

The IMF’s advice should not be dismissed. Blanket subsidies are not a sustainable solution to Nigeria’s energy challenges. They are expensive, regressive and often captured by elites.

But the advice should also not be followed blindly. The history of SAP and its aftermath demonstrates that external prescriptions, however well-intentioned, can cause immense suffering when they are applied without adequate attention to local conditions, institutional capacity and the immediate needs of the population.

The middle path is one that combines targeted support with the development of the institutions needed to deliver it effectively.

This means investing in social registries, digital payment systems and the administrative capacity to identify and reach vulnerable citizens.In the interim, temporary measures that provide relief, like the NNPC discount may be necessary to prevent a political and humanitarian crisis.

The key is to ensure that these measures are truly temporary and that they do not become a permanent substitute for the structural reforms needed to build a more resilient economy.

WHY IT MATTERS

For Nigerians, the IMF’s advice is part of a familiar pattern: external institutions prescribing policies that are technically sound but politically and socially difficult to implement.

The question is not whether the IMF is right about blanket subsidies. It is whether Nigeria has the institutional capacity to implement the alternative that the IMF recommends.

If the answer is no, then the advice, however well-intentioned, risks becoming another SAP, a programme that adjusts the economy but fails to develop it, that stabilises the treasury but impoverishes the people.

The lesson of history is that every advice needs to be domesticated. What works in Bangkok may not work in Benin City. What works in theory may not work in practice. And what works for the treasury may not work for the family counting the meals they can afford.

ValidViewNetwork reports that the IMF has advised Nigeria against restoring blanket petrol subsidy. The debate over how to protect vulnerable Nigerians while maintaining fiscal sustainability will continue to shape the 2027 election.