Hardship: IMF Urges Tinubu Govt To Phase Out Electricity Subsidy

In a bid to cushion the effect of the hardships Nigerians have experienced in recent times due to the elimination of fuel subsidy, the International Monetary Fund (IMF) has called on the Federal Government to totally phase out electricity subsidy in the nation.

The Bretton Woods Institution made this call on Monday as the only mechanism for Nigeria to restore macroeconomic stability.

The IMF call is in agreement with what the federal government had said late last year that electricity subsidy between January and September 2023 had gulped N375.8 billion, as power consumers paid a total of N782.6 billion for the commodity during the same period.

The IMF also noted that the Nigerian government had outgrown itself in its “Post Financing Assessment (PFA)” report, which was released. As a result, the IMF suggested that the elimination of all fuel and energy subsidies be carried out.

The IMF highlighted that the fuel and power subsidies should be eliminated while praising the federal government for the measures it has already put in place.

“The new administration has made a strong start, tackling deep-rooted structural issues in challenging circumstances.

“Immediately, it adopted two policy reforms that its predecessors had shied away from fuel subsidy removal and the unification of the official exchange rates. Since then, the new CBN team has made price stability its core mandate and demonstrated this resolve by dropping its previous role in development finance.

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“On the fiscal side, the authorities are developing an ambitious domestic revenue mobilization agenda. Like many other countries, Nigeria faces a difficult external environment and wide-ranging domestic challenges.

“External financing (market and official) is scarce, and global food prices have surged, reflecting the repercussions of conflict and geo-economic fragmentation.

“Per capita growth in Nigeria has stalled, poverty and food insecurity are high, exacerbating the cost-of-living crisis.

“Low reserves and very limited fiscal space constrain the authorities’ option space. Against this backdrop, the authorities’ focus on restoring macroeconomic stability and creating conditions for sustained, high and inclusive growth is appropriate.

“The CBN has set out on a welcome path of monetary tightening. The Governor has committed to making price stability the core objective of monetary policy, and the CBN has taken actions to mop up excess liquidity.

“Continuing to raise the monetary policy rate until it is positive in real terms would be an important signal of the direction of monetary policy.

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“The government’s focus on revenue mobilization and digitalization would improve public service delivery and safeguard fiscal sustainability. The envisaged reduction in the overall deficit in 2024 would help contain debt vulnerabilities and eliminate the need for CBN financing.

“Temporary and targeted support to the most vulnerable in the form of social transfers is needed, given the ongoing cost-of-living crisis. Fuel and electricity subsidies are costly, do not reach those that most need government support, and should be phased out completely,” IMF said.