IMF advises FG to channel subsidy removal funds to support suffering Nigerians
The International Monetary Fund (IMF) has urged the Federal government to channel the savings from petrol subsidy removal to support vulnerable households in the country.
Abebe Aemro Selassie, Director of the African Department at the IMF, spoke during a press briefing in Washington DC.
Aside from Nigeria’s business community, the IMF has been at the vanguard of championing major policy reforms in Nigeria – including advising Nigeria to scrap subsidy payments on petrol consumption.
On May 23, President Bola Tinubu had announced an end to subsidy, and capped it off with the liberalisation of the foreign exchange (FX) system.
Both policies have since unleashed significant economic hardship on Nigerians with a double-digit inflation rate of more than 30 percent, and petrol prices surging by over 60 percent from 2023 — amid a weak currency.
Speaking on the considerations that informed the IMF’s policy suggestions to Nigeria, Selassie said the situation predating the recent policy changes was unsustainable.
He said when subsidies were significant and the exchange rate was being kept at an artificial level, there were other imbalances in the economy — including high levels of inflation and shrinking reserves.
“Government’s ability to borrow from markets was heavily compromised and this was the really difficult trade-off that the government in Nigeria over recent years have faced,” the IMF director said.
“The inability to have a healthy macroeconomic situation, one that would foster growth, diversification, resources to invest in health and education that were needed, because so much resources were being used by fuel subsidies. It wasn’t sustainable.”
