By Abubakar M. Kareto
The International Monetary Fund has once again urged Nigeria to reject any return to broad fuel subsidies, insisting that authorities maintain full cost-reflective pricing at the retail pump and rely solely on targeted cash transfers. Speaking in Bangkok, Rodrigo Valdés of the Fund’s Fiscal Affairs Department framed blanket fuel support as regressive, claiming it consumes between 1 and 1.5 percent of gross domestic product across developing states. His core maxim sounds elegant: protect people, not the price of fuel.
Yet in an economy where petrol now trades between N1,100 and N1,350 per litre across major depots and filling stations, that formulation is dangerously detached from structural realities. Across motor parks, agro-allied processing hubs, and neighbourhood markets, it reads as another clinical lecture that prioritises sovereign debt sustainability ratios over human survival.
Orthodox multilateral models treat price signals in Nigeria as if they operate within a frictionless, integrated market. They do not. According to the National Bureau of Statistics, transport inflation remains a relentless driver of broad price pressures, directly feeding food inflation, which still hovers around 19.6 percent. In an economy where over 80 percent of the labour force operates in the informal sector and the national electrical grid regularly collapses, Premium Motor Spirit is not a private consumer indulgence. It is capital equipment. It powers irrigation pumps, commuter minibuses, cold-storage units, and micro-enterprise generators. When pump prices swing violently, production costs escalate instantly, destroying operating margins for millions of small traders.
The global double standard here is impossible to ignore. When the energy crisis destabilised Europe, Western capitals did not subject their domestic markets to unadulterated price discovery. Germany mobilised a 200 billion euro economic shield to cap household gas and power bills. France froze retail gas prices and deployed fuel rebates. In North Africa, Egypt continues to absorb significant budgetary pressure on bread and energy to prevent social upheaval, recalibrating reforms in phases rather than risking civil unrest.
Those leaders were not reckless. They recognized a basic rule of political economy: efficiency is worthless if it shatters social cohesion. If industrialised economies with extensive institutional buffers refuse to expose their citizens to unmitigated price volatility, why should Nigeria, with over 100 million people living in multidimensional poverty, serve as a laboratory for raw shock therapy?
The theoretical critique of blanket subsidies is valid. The old regime was fiscally ruinous, bled foreign reserves, and enriched cross-border smuggling networks. However, the fatal flaw in the Fund’s alternative prescription is institutional: Nigeria simply does not possess the operational machinery to execute effective cash transfers at scale. The national social register remains fragmented and contested, plagued by coverage gaps and banking exclusion in remote rural communities. Stacking N25,000 stipends against monthly household expenditure shocks is not a social safety net. It is an administrative afterthought.
This vulnerability is most severe across the agrarian belts of the North-East and North-West. Prolonged insecurity has already depressed crop yields and fractured primary trade corridors. When elevated diesel and petrol costs inflate freight charges on arterial roads, rural farmers cannot move produce to urban markets, and regional food deficits widen. Textbook advice cannot service an irrigation pump, settle emergency clinic bills, or keep children enrolled in primary school.
A sovereign administration cannot surrender its domestic social contract to international lenders. Shielding citizens during deep structural transitions is not an evasion of economic reform; it is the fundamental responsibility of statecraft.
Nigeria does not need a return to corrupt, opaque subsidy payments to traders. Nor can it endure unhedged exposure to imported fuel volatility. What the country needs is pragmatic price stabilisation anchored in local refining capacity, domestic crude-for-naira transactions, accelerated deployment of compressed natural gas infrastructure, and verifiable transport rebates for essential logistics corridors.
Fiscal consolidation is a necessary instrument of governance. But when fiscal orthodoxy hardens into indifference toward widespread human distress, it ceases to be prudence and becomes systemic policy failure. The poor cannot eat macroeconomic stability.
Abubakar M. Kareto is a Public Affairs Analyst and Communications Strategist focusing on governance, public policy, and institutional reform across Nigeria and Africa. He can be reached on X @amkareto and via email at amkareto@gmail.com.
