The International Monetary Fund has again urged the Nigerian government to eliminate subsidies for fuel and electricity once the social protection scheme has been enhanced.
- The International Monetary Fund has again urged the Nigerian government to eliminate subsidies for fuel and electricity once the social protection scheme has been enhanced.
- The IMF projected that the implicit fuel subsidy could reach as high as N8.4 trillion in 2024.
- The IMF projects that the electricity subsidy paid to customers under Bands B, C, D, and E is expected to reach N540 billion by the end of 2024.
According to a recent report titled “Nigeria: 2024 Article IV Consultation” by the IMF, these subsidies would consume three per cent of the nation's Gross Domestic Product in 2024, compared to one per cent in the previous year.
The IMF commended the Federal Government for several measures, including the gradual elimination of "costly and regressive energy subsidies."
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However, the international lender said adequate compensatory measures for the poor were not scaled up promptly and subsequently paused over corruption concerns.
IMF said about 15 million households or 60 million Nigerians will potentially benefit from an enhanced social intervention scheme the federal government developed with World Bank support.
What IMF said:
“Once the safety net has been scaled up and inflation subsides, the government should tackle implicit fuel and electricity subsidies.”
“With pump prices and tariffs below cost-recovery, implicit subsidy costs could increase to 3 per cent of GDP in 2024 from 1 per cent in 2023. These subsidies are costly and poorly targeted, with higher income groups benefiting more than the vulnerable”.
The IMF projected that the implicit fuel subsidy could reach as high as N8.4 trillion in 2024, compared to N1.85 trillion in 2023, N4.4 trillion in 2022, N1.86 trillion in 2021, and N89 billion in 2020.
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The body also acknowledged that the price of electricity had tripled for high-use premium consumers on Band A feeders, constituting 15 per cent of the 12 million customers who collectively account for 40 per cent of electricity usage.
While this increment has stirred negative reactions from Nigerians, IMF says the “Tariff adjustment will help reduce expenditure on subsidies by 0.1 per cent of Gross Domestic Product, while continuing to provide relief to the poor, particularly in rural areas”.
The IMF projects that the electricity subsidy paid to customers under Bands B, C, D, and E is expected to reach N540 billion by the end of 2024.
