The International Monetary Fund (IMF) emphasized its advice to the Nigerian government to remove fuel subsidies, stating that it would benefit the poor masses in the country.
Abebe Selassie, the Director of the IMF African Department, shared insights on the organization’s stance at the ongoing IMF and World Bank spring meetings in Washington DC.
Selassie noted that the IMF had provided strong evidence on how the poor could benefit from the policy through social safety nets. He explained, “Subsidies are about resource allocation internally within Nigeria. So Nigerians, the people of Nigeria pay for these subsidies.”
He continued, “And what’s the reason why we counsel against such generalized subsidies is very simple. It tends to be highly regressive, meaning the benefits of such, you know, fuel subsidies tend to accrue to the rich and segments to reach out to people and the poor people.”
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Selassie emphasised that subsidy reform is crucial as it redirects resources to improve conditions for poorer people instead of benefiting the rich.
He commended the government for steps taken to reduce the extent of subsidies and encouraged the removal of subsidies to provide social protection for vulnerable households.
Regarding the IMF’s support for African countries during the COVID-19 pandemic, Selassie highlighted that $58 billion had been allocated to African countries and committed to further assistance.
He warned against African countries taking out commercial loans to refinance due to recent rate hikes in most economies.
Selassie advised countries facing debt service issues south of the Sahara to focus on internal resource mobilization instead of seeking external financing.
He criticized the practice of providing unfair tax breaks to select corporations, stating that it reduces governments’ ability to optimize tax revenue.
The position of the IMF emphasises the importance of subsidy reform as a means to allocate resources more efficiently and benefit the most vulnerable segments of society. As discussions continue at the spring meetings, the Nigerian government may consider IMF recommendations in its policy decisions.