The International Monetary Fund (IMF) has warned Nigeria against restoring petrol subsidies, arguing that they are costly and often benefit wealthier consumers more than vulnerable households. This warning comes amid rising energy prices and mounting pressure on the government to either provide financial relief or reinstate a policy that previously strained public finances.
Recently, the federal government announced that the Nigerian National Petroleum Company (NNPC) Limited would sell petrol at cost for 30 days by suspending its retail profit margin. The measure was intended to cushion the impact of rising global crude oil prices, with priority given to commercial transport operators.
Taiwo Oyedele, the Minister of Finance, also stated that the government was negotiating a ceiling of ₦1,350 per litre on petrol’s ex-gantry or landing cost. Under the proposed arrangement, refiners and importers would initially bear costs above the ceiling and recover the shortfall later when market conditions improved. The government described the discount as temporary relief, not a return to the petrol subsidy removed in May 2023.
The IMF’s concern is that keeping petrol prices artificially low does not necessarily provide the most effective support to those who need it. Rodrigo Valdés, Director of the Fund’s Fiscal Affairs Department, said fuel subsidies and measures that prevent energy prices from adjusting fully to supply shocks had cost countries between 1 percent and 1.5 percent of Gross Domestic Product (GDP) in 2026. He argued that broad subsidies often benefit higher-income consumers disproportionately because they generally consume more fuel.
“Protecting people is not the same as protecting the price of fuels,” Valdés said.
Before the subsidy was removed in May 2023, the cost of keeping petrol prices below market levels consumed a significant share of Nigeria’s oil revenue. The World Bank estimated that petrol subsidies drained 32 percent of government revenue in 2022, with payments reaching ₦4.53 trillion. Gross oil and gas revenue stood at ₦8.48 trillion, but after subsidy payments and other deductions, net oil and gas revenue fell to ₦3.58 trillion.
Davide Furceri, a Division Chief in the IMF’s Fiscal Affairs Department, suggested subsidising public transport fares instead of petrol, arguing that this would provide more direct relief to people affected by rising transportation costs. He also identified school feeding programmes and assistance for vulnerable farmers as alternatives. However, implementing these measures in Nigeria would require an effective system for identifying beneficiaries and delivering assistance, particularly given the difficulties of reaching people who work in the informal sector.
Nigeria’s budget deficit has also raised concerns about how the government manages its finances. According to the IMF’s 2026 report, the consolidated government deficit increased from 2.4 percent of GDP in 2024 to 4.4 percent in 2025. The Fund estimated that savings from subsidy removal could reach 2 percent of GDP, but said these savings did not appear to have accrued to the budget in 2025. It also identified a statistical discrepancy of 2.7 percent of GDP, which could reflect government spending not captured in official records. A return to broad petrol subsidies would put further pressure on government finances, especially as the expected savings from subsidy removal have yet to reflect in the budget.
Wumi Iledare, a Petroleum Economist, said the discount could help reduce transport costs, but only if operators passed the savings on to passengers. “If a transporter receives cheaper petrol but passengers continue paying the same fare, the public does not receive the intended welfare gain.” He also called for transparency about the cost of the discount and its financial impact after the 30 day period.
The discount is scheduled to last for 30 days, but the government has yet to clarify what will happen when the period ends. Analysts argue that if NNPC resumes its retail profit margin while fuel prices remain high, transport fares and household spending could come under renewed pressure. The temporary measure may offer some relief, but the government still faces the challenge of easing the burden of high fuel and transport costs without returning to broad petrol subsidies.
