IMF advises FG to use fuel subsidy funds to assist vulnerable households.

The Federal government has been urged by the International Monetary Fund (IMF) to use fuel subsidy funds to assist needy households in order to lessen the effects of food shortages and inflation brought on by flooding and climate change.

Abebe Aemro Selassie, director of the IMF’s African Department, made this statement at a press conference on the Regional Economic Outlook for Africa in Washington. He emphasized that petrol subsidies benefit wealthier families and households more than they do poorer households.

One of the four critical policy concerns facing African countries, according to the IMF’s Africa Regional Outlook, is addressing food insecurity in order to safeguard the most vulnerable, with an emphasis on practical and cheap solutions that direct limited resources to those who most need them.
Selassie discussed the choices open to the Nigerian government in terms of aid for needy households: If there had been a more tailored approach to assisting individuals rather than the current generalized fuel subsidies, Nigeria would have benefited much more. As a result, although there has been a fairly considerable increase in oil prices, the amount of resources that are accruing to budgets and external accounts has been severely constrained due to the nation’s extensive subsidy program.

“I believe we have a long history of warning that generalized subsidies like this one are very expensive and, more importantly, very regressive. As a result, they tend to assist wealthier families and households more than they do poorer ones. Finding a mechanism to route these funds to the most vulnerable households and supplementing it with investments in the health and education that Nigerians so sorely require would, in our opinion, be a better policy.

“When there is a significant increase in prices, it is logical that governments may wish to take measures to moderate the rise in costs, including gasoline subsidies. However, these measures should only be temporary, phased out gradually, and well explained.

“In the end, Nigeria must make a political choice, and if that is how the nation chooses to spend its riches, that is how they will be used. However, you know, our job is to point out that there are better things that might be done in Nigeria to promote economic efficiency.