IDEAS home Printed from
   My bibliography  Save this article

Subsidies and the Demand for Petroleum Products in Nigeria


  • Alex O. Umeanozie

    (Department of Economics, University of Nigeria Nsukka)

  • Eleanya K. Nduka

    () (Department of Economics, University of Nigeria Nsukka)

  • Jude O. Chukwu

    (Department of Economics, University of Nigeria Nsukka)


The study empirically examines the effect of subsidies on the consumption of petroleum products in Nigeria for the period of 1970 to 2007. The study employs Augmented-Dickey Fuller (ADF) test for unit root, Engle and Granger (1987) approach for cointegration and Error Correction Model (ECM) for correcting disequilibrium. The ADF test suggests that the variables are mean reverting series after first order difference. The results of the cointegration and ECM confirm that a stable, long-run relationship exists between the demand for petroleum products and their respective determinants: subsidies, real income, prices of the products, prices of substitutes and population. The empirical results show that the elasticity of own and substitutes’ prices are negative, while the own price of diesel, subsidy, real income and population coefficients are positive. Meanwhile, the coefficient of subsidy on gas demand is negative. Hence, the removal of subsidy from petroleum products is not the problem, but the misapplication of the fund meant for the subsidy. This is due to the fact that the subsidy does not reflect in the prices of petroleum products in Nigeria. Therefore, the managers of the economy should ensure that subsidies are better used to achieve economic growth.

Suggested Citation

  • Alex O. Umeanozie & Eleanya K. Nduka & Jude O. Chukwu, 2014. "Subsidies and the Demand for Petroleum Products in Nigeria," International Journal of Sustainable Energy and Environmental Research, Conscientia Beam, vol. 3(2), pages 100-109.
  • Handle: RePEc:pkp:ijseer:2014:p:100-109

    Download full text from publisher

    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Yeboah Asuamah, Samuel, 2015. "Government activities and fossil fuel consumption in Ghana," MPRA Paper 89549, University Library of Munich, Germany, revised 15 Aug 2018.

    More about this item


    Access and download statistics


    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:pkp:ijseer:2014:p:100-109. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Editorial Office). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.