By Editor
Days after the federal government introduced a fuel discount at all NNPC stations nationwide, the International Monetary Fund (IMF) urged the government to consider targeted bus fare support rather than blanket subsidies.
The Fund said using public resources to cushion the impact of rising fuel prices on vulnerable Nigerians would be more effective than subsidising fuel for everyone, warning that failure to recognise the economic shock could impose high costs on the country.
Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, announced a N66 discount on fuel prices at all NNPC outlets nationwide for 30 days, as part of measures to ease the impact of fuel prices on the cost of living. He had, however, stressed that it was not a return to subsidy, as many had termed it.
Speaking at the Fiscal Monitor press briefing at the ongoing International Monetary Fund and World Bank 2026 Annual Meetings in Bangkok, Thailand, Director of the IMF’s Fiscal Affairs Department, Rodrigo Valdés, said although governments might be tempted to shield citizens from rising fuel prices, targeted interventions would deliver better results.
“At the end of the day, it is very tempting politically speaking because the political effect of the price of oil, fuels, gasoline and diesel is not trivial,” Valdés said as he cautioned that governments must recognise the economic consequences of rising fuel prices and avoid the high fiscal costs associated with blanket subsidies.
“But you have to explain that this is a growth shock. First, second, it is very, very expensive for the country not to recognise that shock, and third, it is much better to use some of that money that would otherwise be spent on subsidies to channel support towards more vulnerable people,” he said.
Valdés specifically pointed to transportation costs as an area where governments could provide targeted relief to households affected by rising fuel prices. “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,” he said.
The IMF’s position comes as the Federal Government seeks to cushion the effects of elevated fuel prices on households, while maintaining that its N66-per-litre discount is a temporary intervention rather than a reversal of its fuel subsidy reform.
Also speaking at the briefing, Davide Furceri, Division Chief of the IMF’s Fiscal Affairs Department, said governments facing mounting cost-of-living pressures and rising debt-servicing costs should focus on improving revenue mobilisation and directing expenditure towards more productive uses.
“What we are currently recommending to many countries that face this trade-off between cost-of-living pressures, on the one hand, and increasing debt service and fiscal costs, on the other, is really two sets of policies. One, as we mentioned, is to tax better, and the other is to spend smarter,” Furceri said.
He noted that countries such as Nigeria and Ethiopia were starting from a low tax base, making it important to generate sufficient revenue to meet debt obligations and finance growth-enhancing expenditure.
“It is important to have sufficient revenue for two reasons: one, because this revenue will help the countries to pay high interest costs, and second, because it will generate sufficient resources that the countries can use to spend on growth,” he said.
On expenditure, Furceri said governments should reprioritise spending towards sectors that support long-term economic growth, including education, healthcare and investment, while moving away from broad-based subsidies towards more targeted interventions.
“On the spending side, what we mean by spending smarter are two things. One, many countries have the scope to reprioritise spending towards areas that matter for long-term growth. Think about spending on education, spending on health, and spending on investment. In the current circumstances, countries should also move away from subsidies towards more targeted interventions,” he said.
Acknowledging the difficulties countries face in identifying eligible beneficiaries, particularly where national registries and digital payment systems are inadequate, Furceri said governments should prepare the necessary infrastructure over the medium term.
In the short term, however, he said alternative mechanisms could be deployed to provide relief to vulnerable groups. “Now, typically, one argument that many countries make is that it is very difficult to target subsidies because they don’t have a national registry and need digital payments. It’s important that countries prepare for this in the medium term,” he said.
He added that school feeding programmes, geographical targeting and support for vulnerable farmers, including smallholder farmers, were among the available options. “In the short term, there are alternative ways. Rodrigo mentioned one; school feeding is another. Geographical targeting is another. If countries have vulnerable farmers, there is scope to compensate them, for example, smallholder farmers. So there are many ways,” Furceri said.
