…Recommends cash transfers, transport subsidies for vulnerable Nigerians —
The International Monetary Fund, IMF, has warned Nigeria against restoring a broad petrol subsidy, recommending targeted financial assistance and other relief measures to protect vulnerable households from rising energy costs.
Rodrigo Valdés, director of the IMF’s Fiscal Affairs Department, gave the warning during a press briefing on the fund’s Fiscal Monitor at the 2026 annual meetings of the IMF and World Bank in Bangkok, Thailand, on Wednesday.
His comments followed a question on how the IMF could recommend allowing energy prices to reflect supply constraints when higher petrol prices in Nigeria could increase transport fares, fuel inflation and deepen poverty, particularly amid calls for the government to restore the subsidy ahead of an election year.
“Protecting people is not the same as protecting the price of fuels,” Mr Valdés said.
He explained that subsidies and other measures preventing domestic energy prices from adjusting fully to global supply shocks had cost countries between one and 1.5 per cent of their gross domestic product in 2026.
According to him, the policy is not only expensive but can also be regressive because higher-income households, which generally consume more fuel, tend to receive a disproportionate share of the benefits.
“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.
Mr Valdés urged governments to rely on social safety nets and household data to identify people who genuinely need assistance rather than subsidising fuel prices for everyone.
“There are better tools to deal with this,” he added.
IMF recommends transport subsidies, cash transfers
The IMF also recommended targeted interventions to cushion the effects of higher petrol prices on transportation and household budgets.
Also speaking, Davide Furceri, a division chief in the fund’s Fiscal Affairs Department, said governments could redirect some of the resources previously spent on blanket subsidies towards vulnerable consumers.
He suggested that governments could support public transport users by subsidising bus fares rather than reducing petrol prices for all 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,” Mr Furceri said.
Other options he identified included school feeding programmes, geographically targeted assistance and support for vulnerable farmers.
Mr Furceri acknowledged that some countries lacked comprehensive household databases and digital payment systems needed to identify beneficiaries and deliver assistance efficiently.
However, he said governments could adopt alternative arrangements in the short term while developing stronger systems for delivering targeted relief.
He stressed that interventions should be limited, targeted and temporary to prevent emergency support from becoming a permanent drain on public finances.
Mr Valdés also warned that blanket subsidies could worsen global energy pressures by preventing consumers from reducing demand when supplies were constrained.
