The International Monetary Fund (IMF) has called for the complete removal of fuel and electricity subsidies in Nigeria early next year.
In the concluding statement of its 2021 Article IV Mission published on Friday, the Bretton Woods institution urged the Federal Government to implement revenue-based fiscal consolidation in the country.
Nigeria, according to IMF, needs major reforms in fiscal, exchange rate, trade, and governance to promote sustainable growth.
It also projected Nigeria’s fiscal deficit to reach 6.3 percent of gross domestic product (GDP) this year despite the increase in oil prices.
The federal government had on November 12, 2021 declared its intention to remove fuel subsidy in July 2022.
The Minister of Finance, Budget, and National Planning, Zainab Ahmed, who disclosed this to journalists in Abuja, said the government planned to pay transport allowance to Nigerians for six or 12 months to cushion the effect of fuel subsidy removal.
IMF said: “The complete removal of regressive fuel and electricity subsidies is a near-term priority, combined with adequate compensatory measures for the poor.
“The mission stressed the need to fully remove fuel subsidies and move to a market-based pricing mechanism in early 2022 as stipulated in the 2021 Petroleum Industry Act.
“Well-targeted social assistance will be needed to cushion any negative impacts on the poor particularly in light of still elevated inflation.
“In addition, the implementation of cost-reflective electricity tariffs as of January 2022 should not be delayed.
“Nigeria’s past experiences with fuel subsidy removal, which have all been short-lived and reversed, underscore the importance of building a consensus and improving public trust regarding the protection of the poor and efficient and transparent use of the saved resources.”
