Abstract
The study investigated petroleum subsidy withdrawal, fuel price hikes and the Nigerian Economy. The purpose of the study was to determine the extent to which the removals of petroleum subsidies stimulate hikes in fuel prices and increases in the prices of products of other sectors in the Nigerian economy. It employed input-output model to determine the value added per sector from the computed table of flow of goods. Subsequently, the impacts of reductions in petroleum subsidies (10%, 20%, 30%, 40% and 50%) on the prices of products from the other sectors were computed. Results showed that reduction in petroleum subsidies stimulate increases in prices of petroleum products and such increases trigger increases in transport fares; increases in transport fares subsequently lead to increases in prices of other products owing to the degree of interdependency among the various sectors. The need for policy makers to be mindful of the economic implications of subsidy removal was suggested, among others.Keywords: Petroleum subsidy; Petroleum subsidy removal; Fuel Price HikeJEL Classification: H25DOI: https://doi.org/10.32479/ijeep.8307
Highlights
Since the discovery of oil in commercial quantities at Oloibiri in the late fifties and the subsequent relegation of the agricultural sector, crude oil has been and is still the mainstay of the Nigerian economy
While the upstream sector prices impact on the prices on refined products in the downstream sector, it is the price increases in the downstream petroleum sector occasioned by gradual removal of petroleum subsidies that has been largely responsible for most of the increases in the prices of petroleum products
All the sectors in any economy and the Nigerian economy in particular, are interdependent since the outputs of a given sector in one period may serve as input requirement for one or more sectors of the economy’s production in another period
Summary
Since the discovery of oil in commercial quantities at Oloibiri in the late fifties and the subsequent relegation of the agricultural sector, crude oil has been and is still the mainstay of the Nigerian economy. Most of the extant studies on oil price fluctuations focused on crude oil prices in the upstream sector. The Nigerian government has been involved in deregulation policy in the downstream petroleum sector which requires withdrawal of petroleum subsidy. Withdrawal of petroleum subsidy often stimulates increases in the prices of petroleum products and increases in transportation cost and prices of other commodities. There is a linkage between the oil sector and every other sector in the Nigerian economy To this end, the dearth of literature on downstream sector and fluctuations in the prices of petroleum products is seen as a gap in literature.
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