The International Monetary Fund (IMF) has again advised the Federal Government to fully eliminate subsidies on fuel and electricity, citing that subsidies are costly and fail to effectively target those most in need of assistance.
IMF’s recommendation was contained in its recent press release titled “IMF Executive Board Concludes Post Financing Assessment With Nigeria.”
However, it raises concerns about the potential for further price hikes in goods and services, worsening the existing economic hardship experienced by many Nierians.
According to the IMF, The current subsidised rates are thought to be significantly below the actual market prices.
“By phasing out these subsidies, the government would allow fuel and electricity prices to align more closely with their true market value, potentially leading to increased costs for consumers,” the press release noted.
The IMF acknowledged the reforms currently embarked on by the current administration such as fuel subsidy removal and the unification of the exchange rate.
While acknowledging the federal government’s ongoing reform efforts, such as partial fuel subsidy removal and exchange rate unification, the body stressed the need for full removal of subsidies to allow market forces to dictate prices.
It recommended the focus on revenue generation and digitisation of public service delivery as a strategy for reducing fiscal deficits.
To ease the impact of rapidly rising inflation, the government has released cereals from the grain reserve, provided subsidised fertiliser to farmers, capped retail fuel and electricity prices.
The government also implemented a civil service wage award, and suspended the VAT on diesel, thus partially reversing the fuel subsidy removal.
