The International Monetary Fund (IMF) has strongly advised the Nigerian government against reinstating blanket petrol subsidies, emphasizing the need to direct support towards the most vulnerable citizens amid rising energy costs. This recommendation was made by Rodrigo Valdés, the Director of the IMF’s Fiscal Affairs Department, during the annual meetings of the IMF and World Bank Group held in Bangkok, Thailand.

Valdés addressed the political pressures that often accompany rising fuel prices, particularly as Nigeria approaches election season. He acknowledged the temptation for governments to implement blanket subsidies to alleviate public discontent but cautioned that such measures are financially burdensome. He stated, "At the end of the day, it’s very tempting politically speaking... But you have to explain that this is a global shock."

The IMF official highlighted that blanket subsidies tend to disproportionately benefit wealthier consumers, who generally consume more fuel. Instead, Valdés advocated for targeted support that would more effectively assist those most affected by higher energy prices. He suggested that while fuel prices may rise, targeted interventions, such as subsidizing bus fares, would be a more efficient use of government resources.

This advice comes at a time when Nigeria is grappling with renewed pressure regarding petrol prices due to increases in global energy costs. In response, the Federal Government recently introduced a temporary 30-day petrol discount at retail stations operated by the Nigerian National Petroleum Company Limited (NNPC), prioritizing public transport operators. Finance Minister Taiwo Oyedele described this initiative as a temporary relief rather than a return to blanket subsidies.

The government is also considering a ceiling of N1,350 per litre on petrol’s ex-gantry or landing cost, which would be subject to monthly reviews. Valdés warned that maintaining subsidies could exacerbate global energy pressures by hindering demand adjustments when supply is constrained. He noted, "When you subsidise, you don’t allow... demand to adjust."

Additionally, Davide Furceri, a division chief in the IMF’s Fiscal Affairs Department, echoed the call for targeted interventions. He suggested that resources currently allocated to blanket subsidies could be redirected towards support for public transport users and other vulnerable groups. Furceri also proposed the implementation of school feeding programs and targeted assistance for farmers as alternative measures to alleviate the impact of rising fuel prices.

While acknowledging that some countries may lack the necessary infrastructure for effective targeted assistance, Furceri encouraged governments to explore alternative methods while working towards establishing robust household registries and digital payment systems. He underscored the importance of ensuring that support is limited, targeted, and temporary to maximize its effectiveness.