The International Monetary Fund (IMF) on Thursday urged the Nigerian government and other African economies to ensure that savings realised from subsidy removal policies are channelled towards social protection for poor and vulnerable people in their countries.
Zeine Zeidane, Director of the African Department of the IMF, made this known at the presentation of the Regional Economic Outlook Update for Sub-Saharan Africa on the sidelines of the World Bank/IMF annual meetings in Bangkok, Thailand.
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Speaking in response to questions on the tension generated by subsidy removal by the government in Nigeria and other African economies, Mr Zeidane said that it becomes imperative for the government to protect the poor in the face of high cost of living exacerbated by the removal od subsidy.
“On the question of subsidies, what I want to say is that as an institution, we recommend in general to governments to pay great attention to social protection and to protect the most vulnerable components of society.
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“It’s not specific to Nigeria, if you look at our programme, we have many programmes but we have always indicated target on social spending. We care a lot about the most vulnerable components of society. Our advice on subsidies is that if you look at subsidies in general, and in particular energy subsidies, they benefit the most wealthy components of society,” he said.
Nigeria has introduced a series of reforms the government said were focused on fixing the structure of the economy, although the impact has been enormous for many Nigerians grappling with cost-of-living crisis.
The government introduced reforms in the foreign exchange market, abolished what it termed a wasteful, corruption-ridden subsidy regime amid fiscal pressures, and institutionalised tax reforms.
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While the reforms have been hailed as positive for the nation’s fiscal health by global development and financial institutions, many Nigerians have expressed frustrations over their impact on the domestic front amid skyrocketed energy prices, high cost of living and sundry inflationary pressures.
Subsidy
The IMF official explained that subsidies, unlike targeted interventions, go to people who don’t need it, while putting pressure on government’s finances and fiscal stability.
He said: “So if you do a certain amount of subsidies, most of it is going to those who don’t need it. And our advice in many places has been to phase these subsidies gradually, and make sure that what you save from the subsidy reform is well targeted to those who actually need it. It’s better to support people who need support than supporting product that actually can affect both your fiscal position but also for oil importers, for example, the level of import bill that you have.
“So it’s important to have a targeted system of support to the most vulnerable components of society.”
Speaking on monetary policy, the IMF said Nigeria has made significant progress towards lowering inflation because it has been coming from a high level and the nation had a high-rate interest rate.
On the growth side, the IMF said its advice for the government has always been to, on one side, mobilise more domestic revenue outside the oil sector, to create fiscal space for education, health, and infrastructure.
The fund also advised Nigeria to “continue the structural reform to be more effective for the private sector”, adding that Nigeria “is a country that has a lot of dynamism, a lot of young entrepreneurs, young tech-savvy populations. So it’s a large market, very attractive for private investment in general.”
The IMF said it is important to do the structural reform in terms of governments, business environment, and integration and so on.
“So all this will certainly help accelerate growth and create jobs,” Mr Zeidane said.
Sub-Saharan Africa Outlook
In its regional report, the IMF said Sub-Saharan Africa is expected to grow by 4.5 percent in both 2026 and 2027 while global supply adjustment, favorable export receipts in some countries, and earlier reforms have helped cushion the Middle East war shock.
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The report added, however, that steady regional growth masks different country experiences with slowing growth in non-resource-intensive economies and continued resilience in resource-intensive ones.
It said pre-war fiscal adjustment and declining debt ratios are important achievements, yet high interest burdens, low reserves in many countries, and falling aid leave limited room for absorbing another adverse shock.
The report said risks remain decidedly tilted to the downside, and policies should sustain needed fiscal adjustment, save temporary commodity windfalls, target support to vulnerable households, and contain persistent inflation.
Protecting productive investment and enabling private-sector growth are essential to make future shocks less costly and improve longer-term living standards, the IMF said.
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