The payment of subsidies on petrol has been resumed by the Nigerian government, according to the International Monetary Fund (IMF). President Bola Tinubu announced an end to the petrol subsidy during his swearing-in speech on May 29, 2023. A few weeks after that, the Central Bank of Nigeria (CBN) merged different exchange rate regimes into one, resulting in the value of the Naira to the Dollar weakening.
In a statement issued over the weekend, the IMF expressed concerns that the government had capped fuel prices at retail stations and advised the administration to stop the payment of petrol subsidies completely to free up funds for the government. After the subsidy on petrol was removed in May 2023, the pump price changed from N185 per litre to N40 per litre and then to N568 per litre at NNPC fuelling stations, while others currently sell above N600.
The government had previously stated that the pump prices would fluctuate from time to time after the subsidy removal, but the price has remained steady despite the fluctuation in the prices of crude oil in the global market.
In its latest statement, the IMF noted that the government has capped retail fuel and electricity prices ostensibly to ease the impact of rapidly rising inflation on living conditions, thus partially reversing the fuel subsidy removal. However, the bank also stated that fuel and electricity subsidies are expensive, do not reach those who most need government support, and should be phased out completely.
The IMF also commended the government for focusing on revenue mobilization and digitalisation, stating that this will improve public service delivery, safeguard fiscal sustainability, and eliminate the need for CBN financing through ways and means, which have grown above N20 trillion.