The International Monetary Fund (IMF) is insisting that the federal government of Nigeria must put an end to fuel subsidy.
The reason for the insistence is because the subsidy as it were only favours the rich and impoverishes the poor.
The IMF Director of the African Department, Abebe Selassie, made this known at the ongoing IMF/World Bank Spring Meeting in Washington DC.
He stressed the need for Nigeria to abolish fuel subsidies, citing their adverse impact on the nation’s most vulnerable citizens.
Selassie argued that these subsidies predominantly benefit the wealthy, at the expense of the poor.
“Subsidies are about resource allocation internally within Nigeria. So Nigerians, the people of Nigeria pay for these subsidies.”
He further explained, “And the reason why we counsel against such generalized subsidies is very simple. It tends to be highly regressive, meaning the benefits of such fuel subsidies tend to accrue to the rich and not to the poor people.”
Selassie noted that by eliminating fuel subsidies, resources could be redirected towards improving conditions for poorer citizens rather than disproportionately benefiting the affluent.
He praised the Nigerian government’s efforts to reduce subsidies and advocated using these resources to provide essential social protections for the most vulnerable households.
The IMF, according to Mr. Selassie, has been actively supporting African countries amidst the COVID-19 pandemic, having provided a substantial $58 billion in financial assistance.
He pledged continued support but cautioned against seeking commercial loans for refinancing due to current high interest rates, advising African nations to focus on domestic resource mobilization instead.
Additionally, Selassie criticized discriminatory tax exemptions favoring specific companies, asserting that these practices hinder governments’ abilities to maximize tax revenues effectively.
Reflecting on Sub-Saharan Africa’s economic recovery, Selassie expressed optimism. “After four challenging years and multiple shocks, Sub-Saharan Africa’s economy appears to be on the mend,” he stated. Economic growth is projected to rise to 3.8 percent in 2024, with inflation decreasing and fiscal consolidation efforts showing promise.
However, Selassie cautioned that challenges persist, including high borrowing costs and limited funding sources. He emphasized the importance of sustained reforms to enhance macroeconomic conditions and promote growth, urging international support for Africa’s development.
“The IMF stands ready to support,” Selassie affirmed, “With the right policy choices today, I am confident that this moment could set the stage for this century to be the African century.”
