The International Monetary Fund (IMF) has cautioned the federal government against returning to broad-based petrol subsidies, warning that suppressing fuel prices could deepen fiscal pressures at a time when Nigeria faces mounting demands to ease the cost-of-living burden ahead of the 2027 general elections.
Rodrigo Valdés, director of the IMF’s Fiscal Affairs Department, made the remarks during a press briefing on the fund’s Fiscal Monitor at the 2026 IMF and World Bank Annual Meetings in Bangkok. He argued that protecting households from energy price shocks does not require governments to keep fuel prices artificially low for all consumers.
“Protecting people is not the same as protecting the price of fuels,” Valdés said.
According to Valdés, fuel subsidies and other measures that prevent energy prices from fully adjusting to supply shocks cost countries between 1 per cent and 1.5 per cent of gross domestic product in 2026. He warned that blanket subsidies are expensive, can disproportionately benefit higher-income consumers and leave governments with less fiscal space, particularly as borrowing costs rise.
Rather than subsidising petrol consumption across the board, the IMF official recommended that governments use social safety nets and household data to identify people most exposed to higher energy costs and direct assistance to them.
President Bola Tinubu removed the petrol subsidy in May 2023, marking a major development in Nigeria’s public finance and energy pricing framework. The reform was intended to reduce the fiscal burden associated with subsidising petrol consumption and free up resources for other public priorities.
But the adjustment also raised pump prices, intensifying pressure on transport costs, food prices and household budgets. The resulting strain has kept subsidy policy politically sensitive, exposing the tension between improving government finances and cushioning consumers against the immediate effects of higher energy costs.
