The International Monetary Fund (IMF) has recommended the total elimination of electricity subsidies by the Nigerian government, echoing concerns over the economic strain faced by Nigerians following the removal of fuel subsidies in May 2023.
In its recently published ‘Post Financing Assessment (PFA)’ report, the IMF emphasized the necessity for Nigeria to restore macroeconomic stability, pointing out that electricity subsidies alone cost the government N375.8 billion between January and September 2023. During the same period, consumers paid a total of N782.6 billion for electricity.
The IMF commended the government’s efforts in implementing reforms but stressed the importance of removing both fuel and electricity subsidies to alleviate fiscal pressure.
The report highlighted Nigeria’s challenging economic environment, characterized by limited external financing, surging global food prices, stalled per capita growth, and high levels of poverty and food insecurity.
While acknowledging the government’s commitment to fiscal consolidation and monetary tightening, the IMF emphasized the need for targeted support for the most vulnerable segments of the population, recommending the phasing out of costly and ineffective fuel and electricity subsidies.
According to the Nigerian Electricity Regulatory Commission (NERC), the government subsidized electricity throughout the first three quarters of 2023, with power distribution companies billing a total of N1.06 trillion during this period.
However, despite significant billing, only N782.6 billion was received, raising concerns about the sustainability of subsidies amidst widespread power outages.
The IMF’s call for subsidy removal aligns with broader efforts to address fiscal vulnerabilities and create conditions for sustained economic growth in Nigeria.