Impacts on Poverty of Removing Fuel Import Subsidies in Nigeria

The petroleum sector contributes substantially to the Nigerian economy; however, the potential benefits are diminished because of the existence of significant subsidies on imports of petroleum products. Subsidies on imported petroleum products are considered to be an important instrument for keeping fuel prices, and hence the cost of living, low. The costs of these subsidies, however, have risen dramatically in recent years along with increased volatility in world petroleum and petroleum product prices and increased illegal exportation of subsidized petroleum products into neighboring countries. Removing the subsidy on fuel is one of the most contentious socioeconomic policy issues in Nigeria today. In this paper, an economy-wide framework is used to identify the impact of removing the fuel subsidy on the Nigerian economy and investigate how alternative policies might be used to meet socioeconomic objectives related to fuel subsidies. The results show that although a reduction in the subsidy generally results in an increase in Nigeria’s gross domestic product, it can have a detrimental impact on household income, and in particular on poor households. Accompanying the subsidy reduction with income transfers aimed at poor households or domestic production of petroleum products can alleviate the negative impacts on household income.

Bibliographic Details

Main Authors:	Siddig, Khalid, Minor, Peter, Grethe, Harald, Aguiar, Angel, Walmsley, Terrie
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2015-07
Subjects:	PROFIT MAXIMIZATION, EMPLOYMENT, FUEL SUBSIDIES, CANE, GOVERNMENT EXPENDITURES, ANIMAL PRODUCTS, PRICE OF FUEL, PRODUCTION, PRICE INCREASES, BARRIER, INCOME, ENERGY PRICING, PERFECT COMPETITION, VEHICLES, ACTIVITIES, REAL GDP, EXCHANGE, GOOD GOVERNANCE, EXPORTS, DEVELOPING COUNTRIES, WOOD PRODUCTS, ELASTICITY, POLITICAL ECONOMY, REGULATORY AGENCY, WELFARE, VARIABLES, DOMESTIC PRICE, GAS, BARRELS PER DAY, SUBSIDY, PRICE, TAX, REAL INCOME, INPUTS, SOCIAL COST, RETURNS TO SCALE, PAYMENTS, AIR, TRANSACTION COST, DEVELOPMENT, OILS, TRADE BALANCE, PETROLEUM, SAVINGS, ROAD, PETROLEUM PRODUCTION, COSTS, OIL, TELECOMMUNICATIONS, ROAD SECTOR, TRANSPORT, KEROSENE SUBSIDIES, CONSTANT RETURNS TO SCALE, DEMAND FOR PETROLEUM PRODUCTS, WATER, EXTERNALITIES, FAILURES, INCREASING RETURNS, DEBT, SUGAR CANE, TRANSPORT EQUIPMENT, PRICE SUBSIDIES, UTILITY, NATURAL RESOURCES, GROSS DOMESTIC PRODUCT, NOMINAL INCOME, FUEL CONSUMPTION, FUELS, SUBSIDIES, ECONOMIC RESEARCH, INFRASTRUCTURE, TAXES, PRICE CHANGE, AUTOMOBILES, INVESTORS, CONSUMPTION, TRANSPORTATION, WAGES, POLICIES, TRUCKS, BALANCE, MARKET PRICES, VALUE, TRADING PATTERNS, POWER, ELECTRICITY, OIL REFINING CAPACITY, DEMAND, FOSSIL FUEL, PRICE CHANGES, ECONOMY, AGRICULTURE, CONSUMERS, INCOMES, MOTOR VEHICLES, ECONOMIC EFFICIENCY, IMPORTS OF PETROLEUM, FUEL PRICES, OIL REFINING, SHARES, ENERGY USE, ECONOMIC THEORY, ENERGY PRICES, PETROLEUM SECTOR, COST OF TRANSPORTATION, ENERGY EFFICIENCY, GOVERNANCE, TRADE, NATURAL GAS, VOLATILE ENERGY, AIR TRANSPORT, GDP, GOODS, THEORY, INVESTMENT, FUEL PRICE, SHARE, COAL, FUEL, CRUDE OIL, SEA TRANSPORT, INVESTMENTS, COSTS OF TRANSPORT, DOMESTIC PETROLEUM, CONSUMPTION OF PETROLEUM, PETROLEUM PRODUCTS, KEROSENE, COMMODITY, FOSSIL, POSITIVE EFFECTS, FUEL COST, PRODUCERS OF PETROLEUM, PRICES, APPROACH, PRODUCTION COSTS, ENERGY, DEVELOPMENT POLICY, COMPETITION,
Online Access:	http://documents.worldbank.org/curated/en/2015/07/24823659/impacts-poverty-removing-fuel-import-subsidies-nigeria https://hdl.handle.net/10986/22460
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