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Nigeria’s Petroleum Subsidy: In Whose Interest is it?

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  • Emmanuel Olusegun Stober

Abstract

Subsidy has been defined as any government intervention, in cash or kind, to private sector producers or consumers for which the government receives no equivalent compensation in return. Fuel subsidy has been a growing liability to Nigeria’s budgets, in a systematic fashion for almost four decades, hence creating vested interest. The exponential growth of cost of fuel subsidy is due to the rising cost of crude oil in the international market, exchange rate volatility and the population growth of Nigeria which resulted in increased petroleum consumption; the combination of these three variables therefore made the cost of the fuel subsidy unsustainable. Understanding the current fuel subsidies magnitude is critical for advancing reform because it underscores the potential socio-economic benefits to be realized. In addition to the burden that fuel subsidy is placing on the national budget, keeping petroleum below the market value has discouraged additional investment in Nigeria’s oil sector, because the visibility of recovering the investment under the artificially low price structure is uncertain.

Suggested Citation

  • Emmanuel Olusegun Stober, 2016. "Nigeria’s Petroleum Subsidy: In Whose Interest is it?," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 2(1), pages 58-70, March.
  • Handle: RePEc:khe:scajes:v:2:y:2016:i:1:p:58-70
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    More about this item

    Keywords

    Corruption; Nigeria; petroleum subsidy; rent seeking;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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