Remove Fuel Subsidy, Official Exchange Rate, IMF Urges FG

Two weeks after the Federal Government suspended the removal of petrol subsidy, the International Monetary Fund has again urged the Nigerian government to stop subsidising fuel.

The Washington-based lender also asked the Federal Government to remove the official exchange rate

The Federal Government had on January 24 suspended its plan to remove fuel subsidy this year. It also proposed to extend the subsidy removal implementation period by 18 months, saying it would engage the legislature for the amendment of the Petroleum Industry Act.

The IMF had in November last year 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.”

The IMF, in a statement on Monday at the end of its Article IV consultation with Nigeria, said despite the recovery in oil prices, the general government fiscal deficit was projected to widen in 2021 to 5.9 per cent of GDP, reflecting implicit fuel subsidies and higher security spending.

According to the Washington-based fund, higher debt service to government revenues (through higher US interest rates and/or increased borrowing) pose risks for fiscal sustainability.

Its executive directors noted that the country’s outlook remained subject to significant risks, including from the pandemic trajectory, oil price uncertainty, and security challenges.

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