The International Monetary Fund has advised Nigeria and other African governments to channel savings from subsidy reforms towards targeted social protection for vulnerable citizens amid rising living costs.
The International Monetary Fund (IMF) has urged the Nigerian government to ensure that savings from subsidy reforms are directed towards social protection programmes for poor and vulnerable citizens.
Zeine Zeidane, Director of the IMF’s African Department, gave the advice on Thursday during the presentation of the Regional Economic Outlook Update for Sub-Saharan Africa on the sidelines of the World Bank and IMF annual meetings in Bangkok, Thailand.
Mr Zeidane said governments should prioritise protecting vulnerable populations from the effects of subsidy removal, particularly as rising living costs continue to put pressure on households.
He explained that the IMF generally recommends targeted social spending, noting that broad subsidies often benefit wealthier segments of society more than those who need assistance.
According to him, governments should gradually phase out subsidies and ensure that the savings are used to support people who are most affected by economic pressures.
“Our advice in many places has been to phase these subsidies gradually, and make sure that what you save from the subsidy reform is well targeted to those who actually need it,” he said.
Mr Zeidane added that targeted support for vulnerable citizens was preferable to subsidising products in ways that could strain public finances and increase import costs for countries dependent on imported goods.
Nigeria has introduced several economic reforms, including changes to the foreign exchange market, the removal of petrol subsidies and tax reforms, which the government says are intended to address structural challenges in the economy.
Although international financial institutions have welcomed aspects of the reforms for their potential to strengthen public finances, many Nigerians continue to face high energy costs, inflationary pressures and an increased cost of living.
On monetary policy, the IMF official said Nigeria had made progress towards reducing inflation, although the country had previously experienced high inflation and elevated interest rates.
He also advised the government to increase domestic revenue from sources outside the oil sector to create more fiscal space for investment in education, healthcare and infrastructure.
Mr Zeidane said further structural reforms could improve the business environment, encourage private investment and support job creation. He described Nigeria as a large market with a dynamic population of young entrepreneurs and technology-savvy people.
The IMF official said reforms to government processes, the business environment and regional integration would help accelerate economic growth and create employment opportunities.
In its Regional Economic Outlook, the IMF projected that Sub-Saharan Africa’s economy would grow by 4.5 per cent in both 2026 and 2027.
The fund said favourable export receipts in some countries, global supply adjustments and earlier economic reforms had helped cushion the impact of the war in the Middle East.
However, it warned that the regional growth outlook concealed differences among economies, with non-resource-intensive countries experiencing slower growth while resource-intensive economies remained more resilient.
The report also highlighted persistent challenges, including high interest payments, low foreign reserves in many countries and declining aid, which could limit governments’ ability to respond to further economic shocks.
The IMF urged governments to maintain fiscal discipline, save temporary gains from commodity price increases, provide targeted assistance to vulnerable households and address persistent inflation.
It added that protecting productive investment and supporting private-sector growth would help countries withstand future shocks and improve living standards over the longer term.