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Petroleum Products Pricing Reform in Nigeria: Welfare Analysis from Household Budget Survey

Author

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  • Mathew Adagunodo

    (Department of Economics, College of Management and Social Sciences, Osun State University, Osogbo, Osun State, Nigeria)

Abstract

This paper examines welfare effects of energy reform particularly petroleum products pricing reform in Nigeria. The data for 5000 households were collected to estimate a demand system for PMS, AGO and DPK. The survey contains information on the occupation and income of the household members, as well as on household expenditure and consumption as well as on a wide range of demographic and socio-economic characteristics. This study use marginal social cost approach to evaluate equity and efficiency implications of petroleum products subsidy reform in Nigeria. The reduction or removal of subsidy on PMS will save largest amount from government budget. When there is distribution concern, the marginal social cost of reducing subsidies on AGO is lowest supporting the reform that have been carried out by removing subsidies on AGO. However, marginal social cost for all petroleum products are extremely low suggesting reduction of subsidies on all petroleum products in Nigeria. These findings revealed that equity argument for continue subsidization of household kerosene can no longer be justified since marginal social cost is low. The reality is that apart from the NNPC outlets, there is no other outlet anywhere in Nigeria where kerosene is sold at the subsidised prices.

Suggested Citation

  • Mathew Adagunodo, 2013. "Petroleum Products Pricing Reform in Nigeria: Welfare Analysis from Household Budget Survey," International Journal of Energy Economics and Policy, Econjournals, vol. 3(4), pages 459-472.
    • Handle: RePEc:eco:journ2:2013-04-29
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    References listed on IDEAS

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    Cited by:

    1. Matthew O. Gidigbi & Kehinde M. Bello & Gbenga F. Babarinde, 2019. "Petroleum subsidy and its impact on tax revenue volatility," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 11(1), pages 24-36, June.
    2. Amin, Sakib & Marsiliani, Laura & Renström, Thomas, 2018. "The Impacts of Fossil Fuel Subsidy Removal on Bangladesh Economy," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 41(02), pages 65-81, June.
    3. Muhammad Atta-ul-Islam Abrar & Muhsin Ali & Uzma Bashir & Karim Khan, 2019. "Energy Pricing Policies and Consumers’ Welfare: Evidence from Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 24(1), pages 1-28, Jan-June.

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    More about this item

    Keywords

    petroleum products; subsidy reform; household s welfare; expenditure elasticities; marginal social cost approach; Nigeria;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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