The International Monetary Fund (IMF) has urged the Federal Government of Nigeria to deliver on its commitment to remove fuel subsidies by mid-2023. The organization stated in its report titled “IMF Executive Board Concludes 2022 Article IV Consultation with Nigeria,” which it released on Wednesday, February 8, 2023, that Nigeria’s economy has recouped the output losses sustained during the COVID-19 pandemic supported by favorable oil prices and buoyant consumption activities. The directors highlighted the need for bold fiscal reforms to create needed policy space, put public debt on sound footing, and reduce vulnerabilities.
This is coming more than a decade after the administration of Goodluck Jonathan’s removal of fuel subsidy was met with massive protests known as Occupy Nigeria across the major cities of the country. On January 1, 2012, President Goodluck Jonathan announced the removal of fuel subsidy and adjusted the pump price of petrol from N65 per liter to N141. The price was later adjusted to N97 after more than a week of protests. It was further reduced to N87 in 2015.
Economists and stakeholders say subsidy removal necessary.
Despite fears that there may be revolts, some economists and stakeholders agree that the removal of subsidy is a necessary step towards a long-needed reform for the country. This step is inevitable since the government cannot make oil refineries operate. The government of Jonathan faced serious backlash from the adjustment in fuel price, but that of President Muhammadu Buhari-led administration adjusted the pump price from N87 to N145 without any protest. Even subsequent adjustments were equally accepted until fiscal policies and pandemic-induced inflation pushed the populace to the edge.
However, the IMF is now calling on Nigerian authorities to deliver on their fuel subsidy removal commitment by mid-2023 in order to increase the country’s well-targeted social spending. Despite rising oil prices, the IMF said that the government’s fiscal deficit is estimated to have widened further in 2022, mainly due to high fuel subsidy costs. It explained that while the current account is estimated to have improved in 2022, foreign currency reserves declined amidst capital outflow pressures. In other words, Nigeria is making more money because of the rising oil prices, but there has been a reduction in savings because of expenditures such as the servicing of debts.
The oil sector risks downside due to price volatility.
IMF’s report noted that the country’s Gross domestic product (GDP) adjusted for inflation has already reached its pre-crisis level and the third quarter of 2022 marked the eighth consecutive quarter of positive growth despite continued challenges in the oil sector. The organization also said that the oil sector faces downside risks from possible production and price volatility, while climate-related natural disasters like floods pose the same risks to agricultural production. “In the medium term, there are upside risks from a potentially stronger reform momentum and a larger-than-expected rebound in oil and gas production,” the IMF is quoted to have said.
Directors at the IMF welcomed the idea of broadening Nigeria’s economic recovery, but they noted that Nigeria missed the opportunity to reap the benefits from higher global oil prices. These occurrences, the IMF said, underscored near-term downside risks, which arise from elevated inflation, high cost of servicing debt, external sector pressures, and oil sector volatility. In preparation for what is to come in the future, the IMF recommended decisive fiscal and monetary tightening to secure macroeconomic stability, combined with structural reforms to improve governance, strengthen the agricultural sector, and boost inclusive, sustainable growth.
Nigeria urgently needs policy reforms to reduce vulnerabilities.
Summarily, the organization’s emphasis has been on creating reforms in Nigeria. It highlighted the need for bold fiscal reforms to create the needed policy space, put public debt on sound footing, and reduce vulnerabilities. In addition, strengthening revenue mobilization, including through tax administration reforms, expanding the tax automation system and strengthening taxpayer segmentation, and improving tax compliance is also a priority. This may be a bit hard for the common Nigerians to navigate because the price of Premium Motor Spirit (PMS) and other fuels will increase before stabilizing without government intervention.
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IMF urges FG to remove subsidy by mid-2023. – The agency says there is need for well-targeted social spending. – Express your point of view.
There is need for Nigeria to actually remove subsidy. It is really not helping us at all. I hope it is removed in the next administration.
The International Monetary Fund has requested that the Federal Government of Nigeria fulfill its commitment to eliminate fuel subsidies by the middle of the year.
Subsidy removal is a crucial first step towards the nation’s long-overdue restructuring. Since the government cannot organize oil refineries to operate, this action is unavoidable.
IMF urges FG to remove subsidy by mid-2023. I believe so much that if peter obi become our president everything will be handle well.
The FG should try and remove the subsidy things are hard for people this fuel subsidy is making things worse in the country I hope they are able to remove the subsidy by mid 2023
The best way to actually resolve this fuel cries is to remove the subsidy. Some so called cabals are the one killing this nation with this subsidy. Let it be removed as see if things will not adjust.
The Federal Government of Nigeria has been urged by the International Monetary Fund to make good on its promise to end fuel subsidies by the year’s halfway point.
The directors emphasized the importance of undertaking significant fiscal changes in order to create the necessary policy space, establish a solid foundation for the public debt, and cut vulnerabilities.
This comes after enormous demonstrations were held in response to the elimination of fuel subsidies by the administration of Goodluck Jonathan, which occurred more than a decade ago.
This measure is unavoidable given that the government is unable to ensure the operation of oil refineries.
In spite of concerns that there may be uprisings, a number of economists and stakeholders are of the opinion that the elimination of subsidies is an essential step towards bringing about the much-required reform in the nation.
The oil industry bears potential downside risks due to fluctuations in production and prices, whereas the agricultural production industry suffers similar risks due to climate-related natural calamities such as floods.
It brought to light the necessity of implementing significant fiscal changes in order to establish the necessary policy space, put the public debt on a sound foundation, and eliminate vulnerabilities.
Despite concerns of uprisings, many economists and stakeholders believe subsidy withdrawal is a necessary step toward national transformation.
Directors stressed the need for major fiscal measures to be implemented to provide adequate room for policymaking, lay a firm groundwork for the public debt, and reduce vulnerabilities.
Without any doubt, the removal of subsidy is a necessary step towards a long-needed reform for the country. IMF recommendations are good and decisive enough and would be advantageous to the country.
The subsidy original was subsidies the cost of fuel purchase but now it is of no effect again. Some certain group of cabals have hijacked the process to enrich themselves at the expense of the mass suffering. I support the removal of subsidy.
Despite worries about possible uprisings, some economists and stakeholders concur that the elimination of subsidies is an essential step towards the nation’s long-needed transformation.
The Federal Government of Nigeria has been urged by the International Monetary Fund to stick to its promise to end fuel subsidies by the middle of the year.