The International Monetary Fund (IMF) has cautioned that Nigeria could incur expenditures totaling around N7 trillion if the country maintains its current policies of subsidizing fuel and electricity prices throughout 2024.
In a statement released following a recent visit by an IMF team led by Axel Schimmelpfennig, the IMF Mission Chief for Nigeria, the organization highlighted the economic challenges inherited by the current administration, including low growth, reduced revenue collection, escalating inflation, and enduring external imbalances.
The statement emphasized that the continuation of capping fuel pump prices and electricity tariffs below their recovery costs could lead to significant fiscal costs, amounting to approximately three percent of Nigeria’s Gross Domestic Product (GDP) in 2024.
The IMF’s visit, conducted as part of the 2024 Article IV Consultations, involved discussions with key Nigerian officials in Lagos and Abuja from February 12 to February 23, 2024.
According to data from the National Bureau of Statistics, Nigeria’s GDP reached N234.4 trillion in 2023, making the potential fiscal costs equivalent to three percent of this figure – totaling N7.032 trillion.
This warning comes weeks after the IMF expressed concerns about Nigeria’s policy of capping fuel prices and electricity tariffs, a measure implemented to mitigate the impact of rising inflation.
The IMF report underscored the need for Nigeria to fully implement its cash transfer program for vulnerable households before considering adjustments to the existing subsidy framework.
Stakeholders, including the Association of Nigerian Electricity Distributors, stressed the importance of targeted subsidies to ensure that assistance reaches those most in need, urging the government to focus its subsidy efforts on the economically vulnerable segments of society.
