IMF asks Tinubu to revoke the power subsidy

May 14, 2024 | International | 0 comments

The International Monetary Fund (IMF) has issued a stern warning to President Bola Tinubu, urging him to take decisive action in eliminating implicit fuel and electricity subsidies in Nigeria.

In a recent report, the IMF underscored the significant impact of these subsidies, projecting that they would consume three percent of the nation’s Gross Domestic Product (GDP) in 2024, up from one percent in the previous year.

While acknowledging the Federal Government’s commendable efforts to phase out “costly and regressive energy subsidies,” the IMF stressed the need to create fiscal space for development spending and enhance social protection while ensuring debt sustainability.

However, the organization voiced concerns over the ineffective implementation of compensatory measures for the poor, which were subsequently halted due to corruption suspicions.

With electricity prices tripling for high-use premium consumers, the IMF emphasized the necessity for tariff adjustments to mitigate subsidy expenditures while providing relief to impoverished communities, particularly in rural areas.

Warning of a potential increase in implicit subsidies to three percent of GDP by 2024 if current trends persist, the IMF reiterated its call for the removal of fuel and electricity subsidies. It highlighted the inefficiency and inequity of these subsidies, which disproportionately benefit higher-income groups while imposing a heavy burden on the economy.

Despite conflicting assertions, the IMF’s admonition underscores the pressing need for Nigeria to address the issue of fuel and electricity subsidies. As public discontent mounts and protests intensify, the government faces escalating scrutiny over its handling of this critical matter. The IMF’s recommendations serve as a timely reminder of the imperative to implement effective policy measures to safeguard the country’s long-term economic stability and prosperity.

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