Comparative analysis of the effects of 0, 20, 50, and 66.5% fuel subsidy removals on household wellbeing in Nigeria: A Structuralist CGE Approach

Ernest Odior ()
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Ernest Odior: Department of Economics, University of Lagos, Nigeria.

BizEcons Quarterly, 2019, vol. 5, 22-44

Abstract: This study did a comparative study of the effects of 0, 20, 50 and 66.5% fuel subsidy removals on the wellbeing of household in Nigeria. By 0, 20, 50 and 66.5% fuel subsidy removals, the premium motor spirit (PMS) will sell at ₦97.00, ₦111.43, ₦133.07 and ₦145.00 respectively. Methodologically, the study used a Structuralist Computable General-Equilibrium (SCGE) model to run simulations that indicate the nature of the effects over the period 2015–2020. The comparative empirical findings from the results show that 0, 20, 50 and 66.5% increases in the pump price of fuel in Nigeria have different effects on household real income and household consumption. Specifically, the findings show that, both household real income and household consumption witnessed negative effects. This study recommends that there is need for targeted assistance to the poor by Nigerian government, under the conditions of declined oil price and fuel subsidy removal to enable them to mitigate the adverse consequences. But then, the government need to properly identify the households that are poor and develop a delivery mechanism for transfer of income and include other types of compensation that target the low income households.

Keywords: Fuel subsidy; Household welfare; Comparative analysis; SCGE (search for similar items in EconPapers)
JEL-codes: C68 D60 P52 (search for similar items in EconPapers)
Date: 2019
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