The International Monetary Fund (IMF) has advised the Bola Tinubu-led administration to gradually remove electricity subsidies in Nigeria, following the government’s earlier removal of fuel subsidies in May 2023, despite the challenges faced by Nigerians following the fuel subsidy removal.
In its published ‘Post Financing Assessment (PFA)’ report, the IMF stated that the federal government has overextended itself financially, recommending the complete removal of both fuel and electricity subsidies to restore macroeconomic stability. This recommendation aligns with the government’s disclosure late last year that electricity subsidy from January to September 2023 amounted to N375.8 billion, with power consumers paying a total of N782.6 billion for electricity during the same period.
The IMF applauded the federal government for its implemented reforms and emphasized the need for the removal of fuel and electricity subsidies to ensure macroeconomic stability. The report highlighted the challenging external environment and domestic issues Nigeria faces, including stalled per capita growth, high poverty and food insecurity, and limited fiscal space and reserves.
The report commended the Central Bank of Nigeria (CBN) for its commitment to price stability and monetary tightening, suggesting that raising the monetary policy rate to positive in real terms would signal a clear direction of monetary policy. It also praised the government’s focus on revenue mobilization, digitalization, and reducing the overall deficit in 2024 to contain debt vulnerabilities.
On the electricity subsidy, the Nigerian Electricity Regulatory Commission (NERC) disclosed that the government subsidized electricity in the first, second, and third quarters of 2023. Despite power distribution companies billing N1.06 trillion nationwide during the nine months, they only received N782.6 billion, raising concerns about the effectiveness of the subsidy in reaching those most in need.
Daily Trust