Olaoye Ayoola Azeez

Volume 7 Issue 3 | Sep 2024

DOI: 10.31841/KJEMS.2024.167

Views: 4

Total Downloads: 0

Download PDF

---

Abstract

Nigeria's economic stability is intricately connected to its transportation sector and fuel pricing. This study aims to investigate the financial implications of fuel subsidy removal on fuel prices, transportation costs, and broader economic indicators by examining Nigeria's public and private sectors. The study employs secondary data from the National Bureau of Statistics of Nigeria and financial reports from selected firms. Statistical methods include panel regression models (random effects), descriptive statistics, and diagnostic tests such as the Hausman test. The study reveals a substantial negative impact of fuel subsidy removal on petrol prices and transportation costs. Post-subsidy removal, fuel prices and transportation costs significantly increased. Additionally, removing subsidies has led to a noticeable rise in inflation, highlighting broader economic consequences. The findings suggest that removing fuel subsidies has adverse financial effects on fuel prices, transportation costs, and overall economic metrics in Nigeria. The study recommends that policymakers implement targeted social safety nets, including cash transfer programs and subsidies for essential goods, and consider a gradual approach to subsidy reform to mitigate economic shocks and foster sustainable growth. Economically, the removal of fuel subsidies has led to increased fuel prices and transportation costs, contributing to inflation and economic instability. Socially, it disproportionately affects low-income households, exacerbating income inequality and social unrest. Policymakers need to consider the trade-offs of subsidy removal and implement measures to protect vulnerable populations, monitor inflation, and adjust monetary policy for sustainable economic growth.