THE International Monetary Fund (IMF) has denied advising President Bola Tinubu to remove petrol subsidies, saying that it was solely Nigerian president’s decision.

Director of African Department, IMF, Mr Abebe Aemro Selassie, said this at the IMF/World Bank annual meetings in Washington DC, the United States, on Friday, noting that the current administration could have adopted a more robust approach to shield the most vulnerable from the effects of its policies.

“The decision was a domestic one. It was President Tinubu’s decision. We don’t have programmes in Nigeria. Our role is limited to regular dialogue, as we have with other nations like Japan or the UK,” he said.

 “A better job can be done by rolling out social protection, particularly for the most vulnerable,” Mr Selassie said.

Subsidy removal, FX float having severe effects

The IMF chief acknowledged the impact of the petrol subsidy removal and the foreign exchange float on Nigerians, saying that a number of families had been upended by those policies.

“The immediate effect of reforms always causes dislocation. We have absolutely, absolutely no doubt that conditions at the moment are extremely difficult. Food price shocks in recent years have been quite acute, and now rising fuel prices are adding pressure on other essential goods,” Selassie noted.

Channel subsidy savings to Nigerian households

The IMF chief further urged the Nigerian government to channel savings from subsidy removals and exchange rate reforms to lower-income households.

“Some of the savings from the fuel subsidy reforms, the exchange rate subsidy being removed, should in our view, be directed to helping cushion the effect on the most low-level households,” he said, stressing the need to socially assist Nigerian families struggling to adjust to the new realities.

IMF exonerates self from blame

The IMF seized the opportunity to absolve itself of any blame regarding Nigeria’s tough policies, even though they had severally advocated the policies implemented by President Tinubu.

According to Selassie, “When subsidies were significant and the exchange rate was being kept artificially low, other imbalances were present in the economy, including high inflation and dwindling reserves. It wasn’t sustainable, and the pressures being felt were affecting health and education, resulting in pain elsewhere. The goal is to achieve a healthy macroeconomic situation that supports growth, resource diversification, and essential social investments.”

IMF’s role examined

There is no specific record of the IMF advising President Tinubu to scrap subsidies. However, it has asked every Nigerian government in power to scrap every form of subsidy.

Im November 2021, the IMF Article IV Staff Mission advised former President Muhammadu Buhari to completely discard petrol and electricity subsidies in Nigeria, as part of the concluding statement of the Article IV Staff Mission to Nigeria.

“The complete removal of regressive fuel and electricity subsidies is a near-term priority, combined with adequate compensatory measures for the poor. The mission stressed the need to fully remove fuel subsidies and move to a market-based pricing mechanism in early 2022 as stipulated in the 2021 Petroleum Industry Act.

“In addition, the implementation of cost-reflective electricity tariffs as of January 2022 should not be delayed,” IMF said.

On several accasions, IMF called on former President Buhari to scrap petrol subsidies. While IMF did not advise President Tinubu directly to jettison subsidies, it hailed him for the courage to scrap them.

President had initiated these two reforms from his first day in office on May 29, 2023. He had announced on the day of his inaguration that “subsidy is gone.” He later floated the exchange rate market via the Central Bank of Nigeria (CBN) – devaluing the Nigerian currency, the naira, by over 70 percent in a little over a year.

World Bank hails Nigeria’s “politically difficult” reforms

Economy Post had earlier quoted the World Bank as saying that the Nigerian government had implemented politically difficult reforms.

In an article seen by Economy Post, Chief Economist and Senior Vice-President for Development Economics at the World Bank, Mr Indermit Gill, said Nigeria’s economic transformation must be allowed to succeed and any attempt to reverse them would set back the cause of reform across the sub-Saharan Africa (SSA).

“No large-scale reform process is ever perfect, but this one must be allowed to succeed — Africa’s future hinges on its success. An economic turnaround in a country with more people in poverty than almost any other would be a game-changer for market-orientated reforms across the continent. Consider the scale of the reforms implemented so far,” he said.

Mr Gill explained that Nigeria now had a market-determined exchange rate, noting that previously, the government had been losing an equivalent of 38 cents for every $1 of government oil export proceeds.

“This benefited some local elites, who acquired dollars cheaply at the government’s expense,” he said, noting that the politically difficult steps taken would yield positive results.

“The unification also got rid of a hefty implicit tax on agricultural and manufactured exports. Costly and regressive petrol subsidies are also being cut. This will help to strengthen Nigeria’s historically shaky public finances and restore the naira as a credible currency. Implementing such far-reaching change is impossible without political commitment from the top. The price of petrol in Nigeria has quintupled since the subsidy cuts, imposing terrible hardship across society,” he explained.