Empirical analysis of fuel price and subsidy reform in Nigeria

Abstract

Fuel subsidy removal has been a very topical and delicate issue in Nigeria. In spite of government assurance that the proceeds from the fuel subsidy withdrawal will be used judiciously and effectively to provide critical infrastructure that will cushion its effects, the opponents have remained resolute on their uncompromising stand against its removal. The goal of this study is to determine the actual size of fuel subsidy in Nigeria. It is therefore hypothesised that there was no significant relationship between price of fuel and fuel subsidy. Simple linear regression technique was used in the analysis. The results suggest that there was a significant relationship between the price of fuel and subsidy at less than 0.01 significant level (R2 = 0.79). This implies that fuel subsidy accounted for 79 per cent of the actual price of fuel. This is an indication that government actually subsidised fuel by 79 per cent of the actual price per litre. In others word, the consumers only paid for 21 per cent of the actual price per litre. This is evidence that fuel is highly subsidised in Nigeria. The study recommends gradual removal of subsidy, and using the money realised from it for cushioning the effects on the poor.

Examining the role of energy efficiency and non-economic factors in energy demand and CO2 emissions in Nigeria: Policy implications

“…Moreover, the energy subsidies in some oil-producing countries (including Nigeria) 9 have been criticised for their pervasive consequences, which include influencing households' energy consuming habits and lifestyle, and causing a deterioration in energy efficiency and consequently higher CO 2 emissions (see e.g. Fattouh and El-Katiri (2013); Nwachukwu et al (2013); Olivia and Gibson (2008)). Arguably, the effect of these dynamics (or factors) on energy demand and CO 2 emissions cannot be captured purely with energy price and income variables (or perhaps with a scenario analysis).…”

Fuel subsidy reform and the social contract in Nigeria: A micro-economic analysis

“…Government credibility is linked to a perception of the government's ability to implement reforms and redistribute or reinvest savings from reforms ( Beaton et al, 2013 ; Bridel and Lontoh, 2014 ; Baig et al, 2007 ; Indriyanto et al, 2013 ; Scobie, 2018 ). In the Nigerian context, some authors have suggested that there is a trust deficit ( Ogbu, 2012 ), with many reform opponents such as labour unions and civil right groups highlighting the inability of governments to protect the poor ( Soile and Mu, 2015 ; Bashir, 2013 ; Nwachukwu et al, 2013 ; Africa Research Bulletin, 2011 ; Akov, 2015 ).…”

“…4 Subsidies exist because the government fixes the price of petrol for consumers below the international price, and uses government resources to pay for the difference. 5 Despite numerous attempts at reform, Nigeria has never successfully removed petrol subsidies, 6 in large part because of strong popular opposition to reform; Nwachukwu et al (2013) as well as Akov (2015) have highlighted the large level of petrol subsidies and the coalition of interest groups that have cooperated to protect the continuation of subsidization.…”

Fuel subsidies and carbon emission: evidence from asymmetric modelling

“…Nonetheless,Elum and Momodu (2017) argued that social and political bottlenecks are the significant impediments to a green Nigeria. Other studies on fuel subsidy discuss in Nigeria but are not explicitly examining the fuel subsidy induced carbon emission growth trajectories are acknowledged (seeAkanle, Adebayo and Adetayo (2014);Nwachukwu and Chike (2011);Nwachukwu, Mba, Jiburum and Okosun (2013);Siddig, Aguiar, Grethe, Minor and Walmsley (2014);Soile and Mu (2015) for an extensive review).…”