The International Monetary Fund (IMF) has urged the Nigerian federal government to fully recover fuel subsidy savings currently retained by the Nigerian National Petroleum Company Limited (NNPCL) in order to sustain ongoing economic reforms and protect fiscal stability.
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In its 2025 Article IV Consultation Report released on Wednesday, the IMF emphasized that redirecting these funds—estimated at N700 billion per month, or roughly 2 percent of Nigeria’s GDP annually—into the national treasury is critical for maintaining a neutral fiscal stance and financing key development programmes.
“Ensuring that the fuel subsidy savings accrue to the government would yield the proposed neutral stance—the full-year savings are estimated at 2 percent of GDP,” the Fund stated.
Although Nigeria officially ended fuel subsidies in 2023, the IMF noted that the expected fiscal gains have yet to reflect in the federal budget due to opaque oil revenue remittance practices by the NNPCL.
The IMF warned that if these savings are not realised by the second half of 2025, and given that ongoing tax reforms are unlikely to yield substantial revenue next year, the government may be forced to cut spending—particularly recurrent expenditure—to make up the shortfall.
“Adjustment would have to come from the expenditure side (0.6 percent of GDP),” the report noted, recommending the prioritisation of recurrent spending cuts while preserving capital expenditure and expanding cash transfers for the poor.
The Fund called for better targeting of investments, suggesting that capital spending be “rationalised to preserve critical projects with the highest contribution to growth and job creation.”
In a scenario where fuel subsidy funds remain off-budget and non-oil revenues underperform, the IMF cautioned that “further adjustment will be needed.” It recommended that the government consider pre-committing to revenue mobilisation measures to expand fiscal space while ensuring debt sustainability.
The IMF acknowledged Nigeria’s recent reforms, including tax initiatives, but noted these may not generate significant short-term revenues. It warned that failure to recover subsidy savings could worsen fiscal constraints, adding pressure on public investments and social protection schemes.
“While those reforms may yield medium-term benefits, they are not expected to deliver significant revenue gains in 2025,” the report said.
The report comes as Nigeria grapples with balancing its infrastructure needs, social protection goals, and rising debt servicing obligations amid volatile oil earnings and persistent economic pressures.
The IMF supports a neutral fiscal policy stance in 2025, cautioning against expansionary spending not backed by concrete revenue measures. It also called for greater transparency in oil sector revenue flows to ensure that economic gains from subsidy removal benefit the broader public.
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