Monday, April 15, 2024

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    Economic hardship: Phase out electricity and fuel subsidies completely — IMF to FG

    The International Monetary Fund (IMF) has advised the Nigerian government to completely phase out costly fuel and electricity subsidies that are inefficient in reaching the most vulnerable.

    “Fuel and electricity subsidies are costly, do not reach those that most need government support and should be phased out completely,” IMF said in a report.

    This recommendation comes in a new report titled “IMF Executive Board Concludes Post-Financing Assessment with Nigeria,” published on Friday, February 9.

    The IMF commended President Bola Tinubu’s administration for tackling structural issues by removing fuel subsidies and unifying exchange rates.

    “The new administration has made a strong start, tackling deep-rooted structural issues in challenging circumstances. Immediately, it adopted two policy reforms that its predecessors had shied away from: fuel subsidy removal and the unification of the official exchange rates.
    Since then, the new CBN team has made price stability its core mandate and demonstrated this resolve by dropping its previous role in development finance. On the fiscal side, the authorities are developing an ambitious domestic revenue mobilisation agenda.”

    External financing (market and official) is scarce, and global food prices have surged, reflecting the repercussions of conflict and geo-economic fragmentation. Per-capita growth in Nigeria has stalled, poverty and food insecurity are high, exacerbating the cost-of-living crisis. Low reserves and very limited fiscal space constrain the authorities’ option space,” the report said.

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