The International Monetary Fund (IMF) has urged the Nigerian government to resist calls to restore broad petrol subsidies, recommending targeted financial assistance and transport support for vulnerable households instead.
The fund warned that general fuel subsidies could strain public finances, particularly as borrowing costs rise, while disproportionately benefiting higher-income consumers who typically consume more fuel.
PetroleumPrice.ng gathered that Rodrigo Valdés, director of the IMF’s Fiscal Affairs Department, made the recommendation on Wednesday during a press briefing on the fund’s Fiscal Monitor at the 2026 annual meetings of the IMF and World Bank in Bangkok, Thailand.
Valdés was responding to concerns that allowing energy prices to reflect supply constraints could increase transportation costs, fuel inflation and worsen poverty in Nigeria, where calls for the reinstatement of petrol subsidies are gaining attention ahead of an election year.
“Protecting people is not the same as protecting the price of fuels,” Valdés said, arguing that governments should focus on protecting vulnerable consumers rather than suppressing prices across the board.
He disclosed that fuel subsidies and other measures preventing energy prices from fully adjusting to market shocks had cost countries between one and 1.5 per cent of gross domestic product (GDP) in 2026.
According to him, such interventions are not only expensive but can also worsen income inequality because their benefits are often skewed towards higher-income consumers.
“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 those most in need of assistance, rather than subsidising fuel consumption for the entire population.
“There are better tools to deal with this,” Valdés said.
Davide Furceri, a division chief in the IMF’s Fiscal Affairs Department, also advocated redirecting some of the resources spent on broad fuel subsidies towards targeted interventions that could reduce the impact of rising energy costs on low-income households.
He cited transport assistance as one alternative, suggesting that governments could subsidise bus fares to protect commuters from rising petrol prices instead of providing a general subsidy that benefits all fuel consumers.
“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.
Other options he identified include school feeding programmes, geographically targeted assistance and support for vulnerable farmers facing higher operating costs.
Furceri acknowledged that some countries lack comprehensive household registries and digital payment infrastructure needed to distribute targeted assistance efficiently. However, he said governments could adopt alternative arrangements in the short term while developing the systems required to reach eligible beneficiaries more effectively.
He stressed that relief measures should be limited, targeted and temporary.
Valdés also warned that broad fuel subsidies could intensify pressure on global energy markets by preventing consumers from adjusting demand when supplies become constrained.
“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 fuel in the world economy. That means that someone else has to adjust more, and the market produces a higher price for that.”
He added that subsidies could generate spillover effects across the global economy by sustaining fuel consumption despite tighter supplies, placing additional pressure on prices.
The IMF’s position comes as the Nigerian government pursues temporary measures to ease the burden of rising petrol prices without formally restoring the broad subsidy regime.
The government recently announced a 30-day petrol discount at Nigerian National Petroleum Company Limited (NNPCL) retail stations, with public transport operators given priority under the arrangement.
Finance Minister Taiwo Oyedele said NNPCL retail outlets would sell petrol at cost by foregoing their retail profit margin. He described the initiative as temporary relief for consumers 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 IMF’s recommendations suggest that assistance focused on transport costs and other essential needs could offer a more fiscally sustainable alternative to a nationwide fuel price subsidy, while directing limited public resources towards households most exposed to rising living costs.