Partial Fuel Subsidy Removal in Nigeria: Its Effects on the Economy and Agricultural Sector

Dorothy Patience Ani, Emmanuel Adah Onoja and Isaac Terna Humbe
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Dorothy Patience Ani: University of Agriculture, Makurdi, Nigeria
Emmanuel Adah Onoja: University of Agriculture, Makurdi, Nigeria
Isaac Terna Humbe: University of Agriculture, Makurdi, Nigeria

International Journal of Social Ecology and Sustainable Development (IJSESD), 2021, vol. 12, issue 1, 98-114

Abstract: The ripple effects of the petrol crisis on the Nigerian economy is multi-faceted: price distortions, volatilities, dutch-disease, corruption, and inefficiencies. This study assessed the effects of partial fuel subsidy removal on agricultural sector and Nigerian economy. The study made use of secondary data obtained from Central Bank of Nigeria Statistical Bulletins, Petroleum Product Price Regulatory Agency (PPPRA), National Bureau of Statistics, Benue State Agricultural and Rural Development Authority (BNARDA), and FAO. Johansen co-integration model and t-test were the analytical tools used. After appropriate robustness checks and ensuring data stationarity, the study found that partial fuel subsidy removal had significant positive influence on the country's GDP, significantly reduced inflation rate, and also reduced life expectancy of Nigerians. Specifically, a percentage increase in petrol price significantly increases GDP by 9.8%; a percentage increase in petrol price increases the prices of rice and maize by 0.75% and 1.50% respectively. The study concludes that increased petrol price had positive effects on GDP and adverse effects on the prices of crop produce. Government should diversify and develop other economies and provide adequate infrastuctural facilities to cushion the effects of subsidy removal. Organic and low-input methods of farming should be adopted to reduce the need for fuel inputs to the food system at all levels.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:igg:jsesd0:v:12:y:2021:i:1:p:98-114

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