The International Monetary Fund (IMF) has warned the Nigerian government against restoring a broad petrol subsidy, recommending instead targeted assistance for vulnerable households to ease the impact of higher energy prices.
The advice came from Rodrigo Valdés, director of the IMF's Fiscal Affairs Department, during a briefing on the fund's Fiscal Monitor at the 2026 IMF and World Bank Annual Meetings in Bangkok. Valdés noted that broad fuel subsidies are fiscally costly, often amounting to 1–1.5 per cent of GDP in affected countries, and tend to be regressive, benefiting higher-income consumers who use more fuel than the poorest households.
"Protecting people is not the same as protecting the price of fuels."
— Rodrigo Valdés, Director, IMF Fiscal Affairs Department
Background: Nigeria's Subsidy Removal
 |
| President Bola Ahmed Tinubu |
| Item | Figure |
|---|---|
| Petrol price before removal | ≈ ₦185–₦200 per litre |
| Recent average price | ≈ ₦1,400 per litre |
| Resources mobilised (Jun 2023 – Dec 2025) | ≈ ₦15.8 trillion |
| Federal government share | ≈ ₦5.4 trillion |
| States and local governments share | ≈ ₦10.4 trillion |
Government figures show the removal mobilised an estimated ₦15.8 trillion in resources for the federation between June 2023 and December 2025. Of this, the federal government received about ₦5.4 trillion, while states and local governments shared roughly ₦10.4 trillion through the Federation Account. Officials say these resources supported higher allocations to states (helping more meet salary obligations), infrastructure, wage adjustments, and debt servicing.
Restoring a broad subsidy that returned prices to pre-reform levels could cost more than ₦20 trillion a year, according to Finance Minister Taiwo Oyedele, potentially straining public finances further and risking naira weakness.
Is the IMF Recommendation Good for Nigeria?
Targeted cash transfers, transport support, or temporary relief for the most vulnerable can, in principle, protect the poor more efficiently while allowing prices to reflect costs. This can free resources for roads, education, health, and productive investment. Nigeria's government has already introduced limited measures such as temporary NNPC margin discounts, tax and duty waivers, and negotiations around a landing-cost ceiling near ₦1,350 per litre, framing them as short-term cushions rather than a full subsidy return.
The Catch: Implementation
Success depends on implementation. Nigeria's social safety-net systems have faced challenges with coverage, timely payments, and leakage. Many ordinary citizens continue to feel the pain of higher transport and food costs that followed the 2023 reforms. Growth has improved in some forecasts (the IMF projected around 4.2 per cent for 2026), yet poverty and living costs remain pressing for large parts of the population.
Without credible, transparent, and scaled-up targeted programmes, the theoretical benefits of market pricing risk being undermined by persistent hardship.
Who Benefits From the Current Situation and Past Arrangements?
Under the Old Subsidy System
Investigations repeatedly uncovered large-scale fraud. Former EFCC chairman Abdulrasheed Bawa has detailed schemes including:
- Ghost imports: claims for cargoes that never arrived
- Over-invoicing: inflated volumes
- Forged documents: sometimes dozens per claim
- Price manipulation
These practices allowed certain oil marketers and intermediaries to extract billions of naira from public funds. The previous regime was widely described as a source of rent-seeking that enriched a network of companies and officials while draining the treasury.
Under Market-Oriented Pricing
Global crude oil producers and traders benefit when international prices rise, as they have during recent geopolitical tensions. Nigerian consumers and businesses, especially those without access to alternative transport or income support, bear the immediate cost through elevated living expenses.
Politicians and opposition figures sometimes capitalise on public frustration by promising subsidy restoration, while the government highlights fiscal gains and warns of the risks of reversal. The real long-term winners will be determined by whether savings translate into better public services, stable finances, and genuine relief for the vulnerable, or whether inefficiency and weak targeting continue to leave ordinary Nigerians struggling.
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