IMF Warns Nigeria’s Tinubu: Maintain Fuel and Electricity Subsidies, Face N7 Trillion Cost in 2024

The International Monetary Fund (IMF) has cautioned Nigeria’s President Bola Tinubu that maintaining fuel pump price caps and electricity tariffs below cost recovery could lead to a staggering fiscal cost of nearly N7 trillion (3% of GDP) in 2024.

The warning comes in the wake of Nigeria’s already challenging economic conditions, including low growth, decreased revenue collection, rising inflation, and long-standing external imbalances.

The IMF’s concerns were made public following a visit by an IMF team led by Mission Chief for Nigeria Axel Schimmelpfennig.

The organization highlighted that the current administration inherited a difficult economic situation, and the capping of fuel pump prices and electricity tariffs could exacerbate the fiscal strain on the country.

Since President Tinubu’s inauguration speech on May 29, 2023, in which he declared the removal of fuel subsidies, the price at the pump has risen dramatically.

After the subsidy elimination in May 2023, the price at NNPC fueling stations jumped from N185 to N400 to N568 per liter, with some stations now selling fuel for over N600.

As Nigeria grapples with these economic challenges, the IMF’s warning serves as a stark reminder of the potential consequences of maintaining fuel and electricity subsidies.

The country must carefully consider its options and weigh the potential costs against the benefits of such subsidies in the long term.

The IMF’s warning to President Tinubu underscores the importance of addressing Nigeria’s economic challenges, particularly in the areas of fuel and electricity subsidies.

The country must navigate these complex issues to ensure a sustainable economic future for its citizens.