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...
| Main Authors: | , , , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2015
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2015/07/24823659/impacts-poverty-removing-fuel-import-subsidies-nigeria http://hdl.handle.net/10986/22460 |
| Summary: | 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. |
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