IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v293y2024ics0360544224004432.html
   My bibliography  Save this article

Assessing the compensation and reinvestment plans for fuel subsidy rationalization in Nigeria: A dynamic computable general equilibrium approach

Author

Listed:
  • Shittu, Ibrahim
  • Abdul Latiff, Abdul Rais
  • Baharudin, Siti ‘Aisyah

Abstract

Ending subsidies on fossil fuels is vital for tackling the climate crises and promoting a transition to cleaner energy systems. However, ensuring a successful subsidy reform requires a detailed understanding of its potential impacts and measures to ameliorate those impacts. This study employs a dynamic computable general equilibrium model to examine the impact of fuel subsidy rationalization in Nigeria and evaluate the proposed compensation and reinvestment plans of the government in minimizing welfare losses and reviving economic activities. We found that a complete, one-off removal of fuel subsidies results in severe economic headwinds and significant welfare losses. While the proposed compensation and reinvestment plans of the government brought positive welfare gains and undid many economic headwinds, it was not the optimal policy pathway in terms of resource allocation. Our result showed that a balanced allocation of resources between compensation and reinvestment that implements three-quarters of the total expenditure in 2024 and the remaining one-quarter in 2025 offered better outcomes. We recommend practical measures to implement the proposed plan to minimize fallouts and maximize economic, social, and environmental gains.

Suggested Citation

  • Shittu, Ibrahim & Abdul Latiff, Abdul Rais & Baharudin, Siti ‘Aisyah, 2024. "Assessing the compensation and reinvestment plans for fuel subsidy rationalization in Nigeria: A dynamic computable general equilibrium approach," Energy, Elsevier, vol. 293(C).
    • Handle: RePEc:eee:energy:v:293:y:2024:i:c:s0360544224004432
    DOI: 10.1016/j.energy.2024.130671
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544224004432
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2024.130671?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:293:y:2024:i:c:s0360544224004432. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.