Remove Fuel Subsidy And Raise Social Spending, IMF Urges FG

The Executive Board of the International Monetary Fund (IMF) has advised the Nigerian government to increase well-targeted social spending to cushion the anticipated adverse effects of fuel subsidy removal.

The Federal has at different times restated its commitment removing fuel subsidy from June.

In a statement detailing the recommendations of the IMF’s just concluded 2022 Article IV Consultation with Nigeria, the international organisation pointed out that fuel subsidy payments have deprived Nigeria of increasing its oil revenues despite recent global oil price increases.

“Directors highlighted the need for bold fiscal reforms to create needed policy space, put public debt on sound footing, and reduce vulnerabilities. They urged the authorities to deliver on their commitment to remove fuel subsidies by mid-2023, and to increase well-targeted social spending,” the IMF said.

It said for Nigeria to increase its oil revenues, it must remain resolute and committed to removing the fuel subsidy in June, even as it called for improvement in transparency and accountability in the oil sector to enhance growth.

The IMF also stated that the new administration to come on board after the general election will be faced with elevated inflation, high-debt servicing, external sector pressures and oil sector volatility, adding that these challenges could be offset if the country was not already facing a revenue challenge and that it creates the backdrop for the need for increased oil revenues, as oil prices are still relatively decent.

Other recommendations made by the IMF consultation were strengthening of the agricultural sector boosting inclusive and sustainable growth; decisive fiscal and monetary tightening to secure macroeconomic stability; and structural reforms to improve governance.