From Business Desk

In a surprising development, the International Monetary Fund (IMF) has confirmed that the new Nigerian government, under President Bola Tinubu, has resumed the payment of petrol subsidies, despite the president’s earlier announcement of an end to them.

In addition, the Naira has continued to weaken against the US Dollar, despite efforts to stabilize the currency.

These developments have led to concerns about the country’s economy and whether the new administration is able to address these challenges.

Recall that on May 29, 2023, during his swearing-in speech, President Bola Tinubu announced an end to the petrol subsidy.

A few weeks later, the Central Bank of Nigeria (CBN) collapsed the different exchange rate regimes into one, with the value of the Naira to the Dollar weakening.

Over the weekend, the IMF issued a statement on the conclusion of its Executive Board’s Post Financing Assessment with Nigeria and it expressed concerns that the government had capped the prices of fuel at retail stations.

The global lender advised the administration of Mr Tinubu to completely stop the payment of subsidies on petrol to free funds to run the government.

After the removal of the petrol subsidy in May 2023, the pump price changed from N185 per litre to N40 per litre and then to N568 per litre at NNPC fuelling stations, while others currently sell above N600.

The government had said the prices would fluctuate after subsidy removal from time to time but the pump price has remained steady despite the prices of crude oil in the global market going up and down.

In its latest statement, the IMF said the government has “capped retail fuel and electricity prices” ostensibly to “ease the impact of rapidly rising inflation on living conditions,” “thus partially reversing the fuel subsidy removal.”

However, it noted that, “Fuel and electricity subsidies are costly, do not reach those that most need government support and should be phased out completely.”

The bank commended the government’s focus on revenue mobilization and digitalisation, saying this will improve public service delivery, safeguard fiscal sustainability and eliminate the need for CBN financing through ways and means, which have grown above N20 trillion.

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