IMF Warns Nigerian Govt Against Returning Fuel Subsidies Despite Worsening Hardship, Cost-of-Living Crisis
IMF Warns Nigerian Govt Against Returning Fuel Subsidies Despite Worsening Hardship, Cost-of-Living Crisis
The warning comes amid persistent global shocks and geopolitical tensions, particularly uncertainties surrounding peace talks between the United States and Iran over the Middle East conflict, which have driven crude oil prices sharply higher.
Nigerians should brace for harsher economic conditions in the coming months as rising food and transportation costs continue to erode household incomes, the International Monetary Fund (IMF) has warned, raising fresh concerns about the country’s fragile economic outlook despite a surge in global oil prices.
The warning comes amid persistent global shocks and geopolitical tensions, particularly uncertainties surrounding peace talks between the United States and Iran over the Middle East conflict, which have driven crude oil prices sharply higher.
While this development offers Nigeria a potential revenue boost, the IMF cautions that the immediate impact on citizens will be overwhelmingly negative.
Nigeria’s crude oil grades, Brass River and Qua Iboe, were sold at $113.82 and $113.72 per barrel respectively, significantly above the $60 benchmark set in the country’s 2026 budget.
Vanguard reports that this places current prices about $53 higher than the budget projection, fueling optimism about increased government revenue.
However, analysts warn that the benefits of higher oil prices may not translate into improved living conditions for Nigerians, as inflationary pressures and structural weaknesses persist.
Speaking at a press conference during the ongoing World Bank/IMF Spring Meetings in Washington, D.C., on Thursday, the IMF’s Director of the African Department, Abebe Selassie, painted a grim picture of the immediate economic reality facing Nigerians and other countries in Sub-Saharan Africa.
“The immediate effect will be quite a bit of pressure, including on food security, either through the limited availability of fertilizer, expensive fertilizer, or even more immediately, as transportation costs have gone up, it’s going to raise the cost of food and so quite a bit of dislocation,” Selassie said.
He added that the ripple effects of rising transportation costs are already hitting households hard across both urban and rural areas.
“We’re already seeing quite a lot of increase in transportation prices that people are facing already. Transportation costs are very high for people in urban areas, rural areas even more so,” he stated.
Highlighting the growing strain on citizens, Selassie noted that the crisis is already biting deeply.
“We are already seeing quite a bit of a pinch from the crisis on people. It is making life difficult for people,” he said.
Despite the worsening cost-of-living crisis, the IMF urged the Nigerian government and others in the region not to abandon ongoing economic reforms, stressing that maintaining policy consistency is critical in navigating the current turbulence.
“What is it that governments can do given the limited fiscal space? First point I need to make is we shouldn’t underestimate just how much governments have done to try and position themselves better to weather more of these shocks,” Selassie explained.
He acknowledged that recent fiscal reforms aimed at stabilising debt levels and reducing deficits have created some buffer for governments to respond to emerging shocks.
“Steps have been taken to stabilise debt, to reduce fiscal deficits. So that stabilization, I think, helps now when another shock like this comes, because there is a little bit more scope to try and defray the cost,” he said.
However, he issued a strong warning against policy reversals.
“What we are pleading is that these interventions are consistent with the medium-term objectives that countries have, and that they’re not thrown off course by this because that would be a double whammy for countries,” Selassie cautioned.
President Bola Ahmed Tinubu’s administration launched sweeping economic reforms immediately after taking office in May 2023, most notably removing Nigeria’s long-standing fuel subsidy and floating the naira.
According to him, these moves were aimed at stabilizing government finances and attracting investment, but they also triggered sharp increases in living costs.
Reports show households cutting meals, reducing electricity use, and struggling with transport costs due to subsidy removal and tariff hikes.
Critics argue that despite revenue gains, Nigeria’s debt profile is worsening, raising fears of fiscal instability.
Meanwhile, on Nigeria’s borrowing strategy, he emphasised that the focus should remain on sustainability rather than the source of borrowing.
“Whether they borrow externally or domestically has to be seen in totality. What’s really important is trying to keep the level of debt as manageable as possible relative to debt service capacity. Nigeria has a fantastic Debt Management Office. It depends on the macro context,” he said.
Selassie also urged governments to prioritise critical spending and improve efficiency.
“In the short term, the idea is to reprioritise spending, protect priority spending and also to improve the efficiency of spending,” he noted.
He stressed that boosting domestic revenue remains essential, pointing to the need for stronger tax systems.
“Domestic revenue mobilisation, tax policy, tax efficiency and the capacity to elaborate policy, but also implement policy” are critical, he added.
He further underscored the importance of transparency and communication with citizens.
“All of that will require difficult discussions, and communication is important. Engaging with stakeholders is important,” Selassie said.
In a related development, the IMF projected that Nigeria’s debt-to-GDP ratio will rise to 33.1 percent by 2027, even after a slight downward revision from an earlier estimate of 35.3 percent. The new projection remains higher than the 32.3 percent forecast for 2026, underscoring mounting fiscal pressures.
The projection, contained in the IMF’s latest Fiscal Monitor Report released in Washington, comes as Nigeria’s total public debt climbed to N159.27 trillion as of the fourth quarter of 2025, up from N153.29 trillion in the preceding quarter, according to data from the Debt Management Office.
The Fund warned that the global fiscal outlook is deteriorating, with rising geopolitical tensions, particularly the Middle East crisis, likely to worsen public finances through increased fuel and food costs, tighter financial conditions, and higher defence spending.
“Global debt-at-risk three years ahead now stands near 117 percent of GDP, underscoring heightened downside risks,” the IMF stated.
IMF Director of Fiscal Affairs, Rodrigo Valdés, also cautioned governments against delaying difficult fiscal decisions, stressing that crisis response capacity depends heavily on existing fiscal buffers.
“Crisis, of course, require emergency support and people focus on the crisis, but the ability to respond really depends on pre-existing fiscal space, and too often, the needed consolidation is postponed,” Valdés said.
He warned against the use of broad-based subsidies, describing them as counterproductive.
“It would make just harder the central bank job in terms of inflation control,” he said, adding that such subsidies are “fiscally costly, regressive, and hard to unwind.”
https://www.vanguardngr.com/2026/04/rising-costs-imf-warns-of-tough-times-for-nigerians/
