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Fuel subsidy in Nigeria: Fact or fallacy

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  • Nwachukwu, Maxwell Umunna
  • Chike, Harold

Abstract

Opinions have differed sharply in Nigeria on the continued existence of fuel subsidy. The opponents of Government-planned removal of fuel subsidy argue that the existence of fuel subsidy is a fallacy. On the other hand, the proponents opine that the existence of fuel subsidy is a fact. The objective of this study is to empirically examine these claims and counter-claims. It is therefore hypothesized that there is no significant relationship between fuel demand and fuel subsidy factors. Multiple linear regression was used to test the research hypothesis. The result suggests that there is a significant relationship between the fuel demand and fuel subsidy factors (fuel subsidy, and price of fuel), at 0.01 level (R2 = 50.4). This implies that fuel subsidy factors accounted for 50.4 percent changes in demand for fuel. This result is empirical evidence that fuel subsidy is a fact and not a fallacy. This study recommends a gradually controlled withdrawal of fuel subsidy at the level it will be minimally harmful to the economy.

Suggested Citation

  • Nwachukwu, Maxwell Umunna & Chike, Harold, 2011. "Fuel subsidy in Nigeria: Fact or fallacy," Energy, Elsevier, vol. 36(5), pages 2796-2801.
    • Handle: RePEc:eee:energy:v:36:y:2011:i:5:p:2796-2801
    DOI: 10.1016/j.energy.2011.02.020
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    References listed on IDEAS

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    Cited by:

    1. Lin, Boqiang & Xu, Mengmeng, 2019. "Good subsidies or bad subsidies? Evidence from low-carbon transition in China's metallurgical industry," Energy Economics, Elsevier, vol. 83(C), pages 52-60.
    2. Yahuza Danjuma Izom & NuraTankoWakili & Uba Aliyu, 2023. "Policy of Fuel Subsidy Removal in Nigeria: Problems, Prospects and ways Forward," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(10), pages 420-429, October.
    3. Emmanuel Terkimbi Akov, 2015. "Fuel Subsidy Corruption and the Illusions of Economic Reconstruction in Nigeria," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 4, March.
    4. Hua Liao & Zhi-Shuang Zhu & Lu Wang, 2011. "Impact of removal of city gas subsidies on Chinese urban residents," CEEP-BIT Working Papers 23, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
    5. Ju, Keyi & Su, Bin & Zhou, Dequn & Wu, Junmin, 2017. "Does energy-price regulation benefit China's economy and environment? Evidence from energy-price distortions," Energy Policy, Elsevier, vol. 105(C), pages 108-119.
    6. Siddig,Khalid & Minor,Peter J. & Grethe,Harald & Aguiar,Angel & Walmsley,Terrie Louise, 2015. "Impacts on poverty of removing fuel import subsidies in Nigeria," Policy Research Working Paper Series 7376, The World Bank.
    7. Khalid, Syed Adnan & Salman, Verda, 2020. "“Welfare impact of electricity subsidy reforms in Pakistan: A micro model study”," Energy Policy, Elsevier, vol. 137(C).
    8. Shi, Xunpeng & Sun, Sizhong, 2017. "Energy price, regulatory price distortion and economic growth: A case study of China," Energy Economics, Elsevier, vol. 63(C), pages 261-271.
    9. McKitrick, Ross, 2017. "Global energy subsidies: An analytical taxonomy," Energy Policy, Elsevier, vol. 101(C), pages 379-385.
    10. Shumin Jiang & Jingtao Guo & Chen Yang & Zhanwen Ding & Lixin Tian, 2017. "Analysis of the Relative Price in China’s Energy Market for Reducing the Emissions from Consumption," Energies, MDPI, vol. 10(5), pages 1-13, May.
    11. Li, Ke & Lin, Boqiang, 2015. "How does administrative pricing affect energy consumption and CO2 emissions in China?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 42(C), pages 952-962.
    12. Majidpour, Mehdi, 2022. "Policy lessons from the execution of fuel dual-pricing: Insights for fuel-subsidizing economies," Energy, Elsevier, vol. 247(C).
    13. Frances Ifeoma Ukonze & Maxwell Umunna Nwachukwu & Harold Chike Mba & Donald Chiuba Okeke & Uloma Jiburum, 2020. "Determinants of Vehicle Ownership in Nigeria," SAGE Open, , vol. 10(2), pages 21582440209, May.
    14. Rimawan Pradiptyo & Gumilang Aryo Sahadewo, 2016. "Eliminating the Fuel Subsidy in Indonesia: A Behavioral Approach," EEPSEA Research Report rr20160310, Economy and Environment Program for Southeast Asia (EEPSEA), revised Mar 2016.
    15. McCulloch, Neil & Moerenhout, Tom & Yang, Joonseok, 2021. "Fuel subsidy reform and the social contract in Nigeria: A micro-economic analysis," Energy Policy, Elsevier, vol. 156(C).
    16. Siddig, Khalid & Aguiar, Angel & Grethe, Harald & Minor, Peter & Walmsley, Terrie, 2014. "Impacts of removing fuel import subsidies in Nigeria on poverty," Energy Policy, Elsevier, vol. 69(C), pages 165-178.
    17. Pradiptyo, Rimawan & Sahadewo, Gumilang Aryo, 2012. "A growing pain: an experimental approach to discover the most acceptable strategy for lifting fuel subsidy scheme in Indonesia," MPRA Paper 37073, University Library of Munich, Germany.

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    Keywords

    Fuel; Subsidy; Price; Nigeria;
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