The International Monetary Fund (IMF) has recommended that Nigeria discontinue the indirect subsidies for fuel and power.
In a recent report by the institution headquartered in Washington, it was revealed that these subsidies are expected to consume about three percent of Nigeria’s GDP in 2024, which is a significant increase from the previous year’s one percent.
The IMF estimates that the cost of the implicit fuel subsidy could soar to approximately N8.4 trillion in 2024, up from N1.85 trillion in 2023, N4.4 trillion in 2022, N1.86 trillion in 2021, and N0.89 trillion in 2020.
The report emphasized the importance of eliminating “expensive and ineffective energy subsidies” to free up budgetary resources for developmental expenditures and enhance social safety nets, all while keeping the national debt within manageable limits.
The IMF stressed that as the inflation rate decreases and more support is provided to those in need, it would be prudent to phase out the broad fuel and electricity subsidies, possibly maintaining essential services like a baseline tariff.
It’s important to remember that the Nigerian government had previously declared the cessation of fuel subsidies in June of the preceding year.
In a related development, the Nigerian Electricity Regulatory Commission declared a 240% increase in electricity rates for Band A consumers, who receive between 20 to 24 hours of electricity daily, in April 2024.
This decision was met with public disapproval, leading to a slight decrease in tariffs recently.
