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Monday, February 26, 2024

Remove electricity subsidy now, IMF advises Nigeria

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The International Monetary Fund (IMF) has recommended to the Federal Government of Nigeria the complete phase-out of electricity subsidies in the country, aligning with its earlier call for the removal of fuel subsidies in May 2023. 

The advice comes in the wake of economic challenges faced by Nigerians since the elimination of fuel subsidies.

In its ‘Post Financing Assessment (PFA)’ report, the IMF acknowledged the hardship experienced by Nigerians and suggested that the government’s move to restore macroeconomic stability should include the removal of both fuel and electricity subsidies. 

The report highlighted the significant financial impact of subsidies, emphasizing the need for Nigeria to overcome economic challenges and create conditions for sustained, inclusive growth.

The IMF commended the government for reforms undertaken, such as the removal of fuel subsidies and unification of official exchange rates, but stressed the importance of further steps to achieve economic stability. 

The report emphasized the scarcity of external financing and the global surge in food prices, contributing to stalled per capita growth, high poverty rates, and food insecurity in Nigeria.

The IMF recommended a continued focus on revenue mobilization, digitalization, and monetary tightening to address economic challenges. 

It also suggested reducing the overall deficit in 2024 to contain debt vulnerabilities and eliminate the need for Central Bank of Nigeria (CBN) financing.

 The report urged the phasing out of costly fuel and electricity subsidies, stating that they do not effectively reach those in need and should be replaced by targeted support and social transfers to the most vulnerable.

The Nigerian Electricity Regulatory Commission (NERC) recently revealed that the government subsidized electricity in the first three quarters of 2023, with power distribution companies billing users a total of N1.06 trillion during this period. 

However, despite widespread blackouts, the companies received N782.6 billion. 

The IMF insists that its call for subsidy removal aligns with its broader recommendations for economic stability and growth in Nigeria.

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