Deterministic Model and Analysis of Fuel Subsidy in Nigeria Commodity Market Dynamics

Abstract

The Nigerian populace’s anxieties, pessimism, and optimism over removing fuel subsidies have broughteconomic tension. The conflicting views are centered on the overbearing effect of subsidy removal on the costof living and the commodity market. The federal government has hinged the decision on the excessive revenueleakages due to the huge subsidy and the need to re-channel the subsidy fund to more developmental projectsimpacting the Nigerian economy’s growth. Trade union and civil society hinge their opposition to the removalof fuel subsidies based on their overbearing effect on the livelihood of citizens in terms of the subsidy-inducedhigh cost of living and production. In light of this commotion, there is a need to study Nigeria’s fuel subsidy,consumer purchasing power, and commodity market dynamics using mathematical modeling and analysis.This paper proposes a deterministic model to study the dynamics of fuel subsidy, consumer purchasing power,oil-pirating groups, and commodity markets. To gain insight into the impact of oil leaks on the government oilrevenue, the time delay is used to depict the oil theft control by the Nigerian government. Analytically, threesteady-states, namely subsidy-free, pirate-free, and critical steady-states, are obtained, and the conditionsfor their existence are determined and analyzed. The findings of this work highlight veritable conditions foracceptable implementation of these states. The analytical results were numerically verified, and the dynamicsunder these states were demonstrated graphically. The work further recommends the conditions for theacceptable implementation of fuel subsidy removal and the blockage of oil thefts.