However, the controversy over the removal of fuel subsidy was sparked off in june 2011 at the instance of nigeria governors forum, which includes. Subsidy removal had not generated investment in the downstream of the petroleum sector. Nigeria, like other oil exporting countries in the world has embarked on the policy of gradual removal of fuel subsidies since 1970s. Nigeria is the most populous country in africa with a 2011population of 162. Effects of subsidy removal in a country of power instability the removal of fuel subsidy has triggered double in the price of fuel. The pertinency of fuel subsidy in nigerias economic. In this paper, an economywide framework is used to identify the impact of removing the fuel subsidy on the nigerian economy and investigates how alternative policies might be used to meet socioeconomic objectives related to fuel subsidies.
It possesses28percentof africanprovenoil reserves, second after libya, and it is the top producer of african crude oil, producing 24percentof 2010 africanoil production equaling2. The effects of subsidy removal on the effective marketing of petrol in nigeria includes abstract and chapter one, complete project material available the effects of subsidy removal on effective marketing of petrol in nigeria a case study of enugu state abstract almost every home and business is powered by generator fired by subsidized petrol. Jan 10, 2012 nigerias fuel subsidy continues to crowd out other development spending. In the short run, increasing transfers to households would reduce the negative effects of fuel subsidy reform considerably. Similarly, a unit increase in fuel price accounts for a 0. The simulation shows that removal of fuel subsidy affected income distribution.
Therefore, the study is examining the effect of fuel subsidy on the economy of nigeria. Impacts of removing fuel import subsidies in nigeria on poverty. Impact of fuel price increaseon the nigerian economy stephen ikani ocheni, ph. Alhaji lai mohammed was quoted to have said that the clarification.
The effects of subsidy removal on the effective marketing of petrol in nigeria includes abstract and chapter one, complete project material available the effects of subsidy removal on effective marketing of petrol in nigeria a case study of enugu state abstract almost every home and business is powered by. Impact of fuel subsidy removal centre for public policy alternatives. Impact of petroleum subsidy removal on government expenditure in nigeria 1okereke, 2samuel f. The evolution of the fuel subsidy regime is closely related to nigerias process of. Developing countries are generally more susceptible than richer countries to the negative implications of subsidizing goods and services related to energy, agriculture, and medicine. The effects of fuel subsidy removal on nigerians standard of living abstract this study examines the effects of fuel subsidy removal on nigerians standard of living in lagos state in which 50 civil servants were randomly selected in ikeja for the purpose of the study. Impacts on poverty of removing fuel import subsidies in. Chapter 8 impact of fuel subsidy removal on government. Therefore, there is a growing worldwide concern over its spread due to so many factors. Given the recent social unrest in nigeria as a result of this policy change, we also examine the extent government can allay the detrimental effects of the removal of the subsidy on the poor, by combining the removal of the fuel subsidies with other policies aimed at assisting the poor and or domestic producers of petroleum products. Fuel subsidy also hinders the ability of ministries to expand their expenditure function to some extent. The impact of gasoline subsidy removal on the transportation. This study examines the effects of fuel subsidy removal on nigerians standard of living in lagos state in which 50 civil servants were randomly selected in ikeja for the purpose of the study. For instance, in year 2001, nigeria had spent over one billion and five hundred millionn1,500,000,000.
Fuel subsidy, agricultural sector, petroleum, budgetary. Households are affected by the effects on their income. The real cost of fuel subsidy and tax implications by taiwo oyedele the recent announcement by the federal government of nigeria to remove fuel subsidy with effect from january 2012 has been generating a lot of interesting debates and mixed reactions from different quarters. Monday 2 nd, january 2012 nigerians took to the streets to protest a fuel subsidy removal by the then federal government led by president goodluck jonathan. Furthermore, the transparency and competition which will follow the deregulation of petroleum industry, will in turn, attracts inv estors, leading to the establishment of private refineries across the country and this will go along way to help nigeria meet up with its local demand and have surplus for export. Many studies have focused on examining the implications of fuel subsidy for the nigerian economy. In nigeria it is evidenced from the ongoing probes on oil petroleum subsidy fraud in nigeria, fraudulent misappropriation of pension funds, recycling of items in the 2012 budget among others. Department of economics and developmental studies federal university, dutsinma, kastina state corresponding author. The ratios are even starker in comparison with other types of subsidy including agriculture related subsides, public. Smuggled fuel was sold to neighboring countries for up to 10 times the iranian. Women were negatively impacted by reforms when the subsidy was. Origins of nigerias fuel subsidy regime since the 1970s, the nigerian government has exerted influence over domestic fuel prices through a combination of price ceilings and both implicit and explicit subsidies to the oil sector. The positives of oil subsidy removal in nigeria sahara.
Fuel subsidy also imposes adverse effects on energy allocation and investment. Effect of fuel subsidy on the economy of nigeria project. Removing the subsidy on fuel is one of the most contentious socioeconomic policy issues in nigeria today. In addition, since the removal of the petroleum subsidy is perhaps sure way. The effect of subsidy in nigerian economy term paper. The country possesses 28% of africas proven oil reserves, second only to libya. Jun 29, 2007 in the short run, increasing transfers to households would reduce the negative effects of fuel subsidy reform considerably.
Jun 26, 2018 home business energy how fg fuel subsidy reforms affect nigerias economy how fg fuel subsidy reforms affect nigerias economy on june 26, 2018 5. Request pdf impacts of removing fuel import subsidies in nigeria on poverty. The petroleum sector contributes substantially to the nigerian economy. The partial removal of fuel subsidy in nigeria in 2012 has generated a lot of. Statistical data for about eight different periods where fuel hike occurred in nigeria was revealed and the instrument used to collect the data was. Fuel subsidy removal and national development in nigeria.
Nigerias fuel subsidy continues to crowd out other development spending. The aim of this paper is to establish the fact that fuel subsidy is a policy that the government can urgently embark upon to overcome the present recession. Nigerias president, goodluck jonathan, announced on january 01, 2012 the removal of fuel subsidies owing to some of the negative effects of fuel subsidies as highlighted above. Nigerias president, goodluck jonathan, announced on jan 1, 2012 the removal of fuel subsidies owing to some of the negative effects of fuel subsidies as highlighted above. This translated to an increase in fuel pump prices from. The domestic and international implications of fuel subsidy removal crisis in nigeria by onyishi, anthony obayi ph. Fuel subsidy is the nigerian governments financial aid to nigerians to enable the consumption of fuel at a cheaper rate, end unpredictable supply, and ensure stability in domestic fuel price. Irrespective of the negative effects of fuel price increase, the federal government of nigeria on january.
Impacts on poverty of removing fuel import subsidies in nigeria english abstract. Therefore fuel subsidies in their current form may not be efficient and effective in reaching the poor but their total removal will have adverse effect economy wide. The fuel subsidy is one way that our military leaders used to keep us down thereby distorting our economy and making us unable to key into the emergent global economy. Social and psychological effects of the removal of fuel subsidy on the nigerian family. Deregulation would have immediate negative effects on real. The proponents of this idea has suggested the negative economic consequence of price distortion, the dutch disease. Nigerias attempted fuel subsidy removal in 2012 illustrates how the mismanagement of such adverse effects can jeopardise entire reforms. Sep 06, 2016 according to the bbc 2012a, b, however, the nigerian government paid the subsidy on 59 million liters of fuel a day in 2011, although domestic consumption in nigeria was approximately 35 million liters a day. With proper targeting, poor households could be supported for a limited period, for example, a year. This, one of the rationale for removal of the petroleum subsidy is to correct these socials ills that continued to deep down the petroleum sectors.
After this period the positive effects from the careful investments suggested above should start yielding fruits. The effects of crude oil price, its volatility and subsidy. Statistical data for about eight different periods where fuel hike occurred in nigeria was. Introduction nigeria is the largest in africa and the sixth largest oil producing country in the world. Impact of fuel price increaseon the nigerian economy. Oil price shocks, fuel subsidies and macroeconomic in. By michael eboh the nigerian national petroleum corporation, nnpc, has spent n112.
Social and psychological effects of the removal of fuel. The removal of nigerias fuel subsidy and its ripple effects. The history of fuel subsidy removal in nigeria is rather a long one particularly with the negative effects it has on the polity. Fuel subsidy was, before the coming of the goodluck jonathans administration, a policy of the federal government meant to assist the people of nigeria to cushion the effects of economic hardship. Fuel subsidy reform and environmental quality in nigeria. An assessment of the impact of petroleum subsidy on consumer. The study investigated the effects of petroleum subsidy removal on government expenditure in. According to world bank 2009, if fuel were not subsidized, nigeria government should also encourage investors and firms to invest in activities that would be unprofitable. Tables 1 and 2 show that fuel subsidy expenditure is 8. Impact of petroleum subsidy removal on government expenditure. How fg fuel subsidy reforms affect nigerias economy how fg fuel subsidy reforms affect nigerias economy on june 26, 2018 5. Joseph 2012 asserted that fuel subsidy is the fund used by the government to keep down the price of fuel.
Impacts of removing fuel import subsidies in nigeria on. The action congress of nigeria acn has restated its opposition to the planned oil subsidy removal by federal government. Evaluating the impact of nigerias fuel subsidy regime. This translated to an increase in fuel pump prices from n65. Consequences of the january 2012 oil subsidy removal in. The nigeria oil industry is hitherto fraught with corruption and sharp practices. How fg fuel subsidy reforms affect nigerias economy. This paper emphatically identified fuel subsidy as a sound policy that will resuscitate nigeria from the present recession. Specifically the study aimed to pursue the following objectives. Nigeria and their cronies parading as contractors and multinational companies. According to vanguard, nigeria spent about n10 trillion on subsidy payments. To determine the effect of subsidy removal on food items, to. This has a negative impact as the poor are netconsumers and not netproducers of the petroleum products.
The positives of oil subsidy removal in nigeria since the days of one of nigerias foremost president, chief olusegun obasanjo, everything in me has always been against removal of. The politics of fuel subsidy, populist resistance and its. D eme, okechukwu innocent emeh, ikechukwu eke jeffrey department of public administration and local government, university of nigeria, nsukka abstract a flip over from the economy is the issue of fuel subsidy removal, which many. This study is limited to the economic implications of fuel subsidy payment in nigeria limitation of study financial constraint insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection internet, questionnaire and interview. Joseph 2012 asserted that fuel subsidy is the fund. Highlights this paper investigates whether the existence of fuel subsidy in nigeria is a fact or fallacy. History of fuel subsidy removal in nigeria it is necessary at this point to place on record the history of fuel subsidy removal in nigeria is rather a long one particularly with the negative effects it has on the polity. The first effect of the withdrawal of fuel subsidy in nigeria is that the fuel prices become higher than usual. Investors who got licences for the construction of new refineries failed to take off for various reasons. Other mineral deposits like coal, tin and agricultural resources. However, this issue has become highly contentious in recent time due to the incessant nature and the effects on the economy. Chapter 8 impact of fuel subsidy removal on government spending. Nigerias economy was officially declared to be in recession, following the figures released by the national bureau of statistics nbs officially confirmed, although, various government officials notably, the central bank of nigeria cbn governor, godwin emefiele and. One other negative effects of the oil subsidy removal is that the removal was done when the nation was facing severe security challenges and some people capitalize on the insecurity situation at the time of the oil subsidy removal to kill people, destroy properties etc.
Those who support the removal of the fuel subsidy have pointed out among other things that the subsidy regime was blighted by corruption and waste. When the researcher chose this topic fuel subsidy removal and nigerian economyshe was inspired on how nigerians reacted towards the fuel subsidy removal, the strikes, violent demonstrations, high cost of fuel. Fuel subsidy removal and the nigerian economy project topics. Rather, it had generated violent reactions from the people. When the researcher chose this topic fuel subsidy removal and nigerian economyshe was inspired on how nigerians reacted towards the fuel subsidy removal, the strikes, violent demonstrations, high cost of fuel and transportation etc, it was these problems that made the. The possible effects of this policy on nigerias economy are the subject of heated debate. That decision was, however, met with stiff opposition and resistance, especially from. Nigeria is a country endowed with vast mineral resources prominent among which are the oil and gas reserves. Jan 09, 2018 by michael eboh the nigerian national petroleum corporation, nnpc, has spent n112. Consequences of the january 2012 oil subsidy removal in nigeria. This translated to an increase in fuel pump prices from n65 to n140. Nigeria s attempted fuel subsidy removal in 2012 illustrates how the mismanagement of such adverse effects can jeopardise entire reforms.
Government agencies charged with oversight function over the industries are compromised with bribes. The question the proponents of fuel subsidy removal are still able to answer is how significant will the fuel subsidy removal be on the socioeconomic activities in the country given the fact that it is the main source of energy for all facet of the economy. The elasticity of fuel demand shows that a unit increase in subsidy leads to a 0. The results showed that fuel subsidy factors fuel subsidy and price accounted for 50. The pertinency of fuel subsidy in nigerias economic recession.
Nigeria is a nation endowed with abundant human and material resources. Impact of petroleum subsidy on ssb performance in nigeria. The economical effects, without auguring for or against subsidy. Irrespective of the negative effects of fuel price increase, the federal government of nigeria on january 1st,2012ceased to subsidize petroleum in nigeria, for decades nigerians have enjoyed low gasoline prices, now that this.
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