Impact of Subsidy Removal on the Nigeria Economy (a Study of Some Selected Firms in the Nigeria Economy)
CHAPTER ONE
OBJECTIVES OF THE STUDY
The main objective of this study is to investigate the impact of
subsidy removal on the Nigerian economy, other specific objectives are as follows
- To find out the impact of subsidy removal on the cost of transportation
- To know the impact of subsidy removal on the cost of Agricultural products.
- To find out if there is a relationship between subsidy removal and increase in the cost of education in Nigeria.
- To ascertain the impact of subsidy removal on the producing of goods and services.
- To find out how subsidy removal contribute to the reduction of the living standard of average Nigerians.
- The work is poised to make recommendation on the impact of subsidy removal on the Nigerian economy.
CHAPTER TWO
REVIEWED OF RELATED LITERATURE
INTRODUCTION
Nigeria is not the only country to remove fuel subsidy. In 1997, Indonesia removed fuel subsidy after the Asian financial crisis. The removal of fuel subsidy increased the domestic price of fuel and suddenly ignited protests and violent riots which occurred for weeks and forced the incumbent government to resign in 1998 (Chelminski, 2018). Dartanto (2013) examined the relationship between existing fuel subsidies and fiscal balance in Indonesia between 1998 and 2013 and found that removing 25 percent of fuel subsidies increased poverty by 0.259 percentage points while 100 percent removal of fuel subsidies and the reallocation of 50 percent of them to government spending decreased poverty by 0.277 percentage points. Fathurrahman et al. (2017) showed that the reallocation of subsidy payments to low-income households could slow down economic development but improve social welfare. However, removing fuel subsidy usually comes with the promise of using the money saved from subsidy to undertake targeted reform. But in Indonesia, citizens find promises to replace fuel subsidies with targeted spending less credible and would resist the reform if they believe the government is corrupt (Kyle, 2018). Other international studies have also analysed the effect of fuel subsidy removal. Harring et al. (2023) analysed cross-country attitudes towards fossil fuel subsidy removal and found that the public would have positive attitudes towards subsidy removal if there were optimal use of the saved fiscal revenues. In Malaysia, Chatri (2014) assessed the economy-wide effect of gas subsidy removal in the power sector and found that gas subsidy reduction led to increase in the price of electricity followed by a decline in demand for electricity by other economic sectors and a decrease in gross domestic product. Antimiani et al. (2023) showed that fossil fuels are still highly subsidised in EU countries, and there are deliberations to remove fossil fuel subsidies and reuse the revenues to foster the technological transition to a sustainable and decarbonised EU economy. Sampedro et al. (2017) also argued that fossil fuel subsidy is a barrier to tackling climate change in the EU because it diverts investment away from clean energy sources, and fossil fuel subsidies amounted to US$233 billion in 2014 which is four times the amount of subsidies allocated to promote renewable energy. However, they showed that fuel subsidy removal would give rise to only a small reduction in CO2 because people would switch from fuel to coal and gas. Nowag et al. (2021) suggest the use of state aid to phase out fossil fuel subsidies in the EU. Erickson et al. (2017) showed that the removal of tax incentives and other fossil fuel support policies could hasten the attainment of the G20 climate commitments. Lin and Li (2012) examined the case of China and showed that fuel subsidy removal would generate negative externalities in China but would generate positive externalities to other world regions without subsidy removal. In a related study, Ouyang, and Lin (2014) showed that the economic benefits of renewable energy subsidies were lower than the economic benefits of fossil fuel subsidies in China.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Introduction
It is important to ascertain that the objective of this study was to ascertain Impact of Subsidy Removal on the Nigeria Economy (a Study of Some Selected Firms in the Nigeria Economy). In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing Impact of Subsidy Removal on the Nigeria Economy
Summary
This study was on Impact of Subsidy Removal on the Nigeria Economy (a Study of Some Selected Firms in the Nigeria Economy). Six objectives were raised which included: To find out the impact of subsidy removal on the cost of transportation, to know the impact of subsidy removal on the cost of Agricultural products, to find out if there is a relationship between subsidy removal and increase in the cost of education in Nigeria, to ascertain the impact of subsidy removal on the producing of goods and services, to find out how subsidy removal contribute to the reduction of the living standard of average Nigerians and the work is poised to make recommendation on the impact of subsidy removal on the Nigerian economy. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from Dangote cement in Lagos state. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
The conclusion from the discussion in this paper is that the government should carefully consider the impact of removing fuel subsidy on citizens and provide palliatives and other welfare enhancing initiatives to cushion the effect on individuals, households, and firms. The government could consider increasing the national wage, increasing the salary of civil servants, and introducing monetary palliatives to help the poor cope with the effect of fuel subsidy removal. Other social protection measures and social safety nets, such as unemployment benefits and cash transfers, can be adopted too. The government may also need to dialogue with labour unions to find a middle ground solution that meets the government’s need and the needs of the people. It is also important to introduce economic reforms that lead to a more inclusive society. In the end, the success of the fuel subsidy removal will depend on how the government uses the saved funds from the removal of fuel subsidy and what they have achieved with it.
Recommendation
Recommend the establishment or enhancement of robust social safety nets to protect vulnerable populations from the immediate impacts of subsidy removal. These safety nets could include targeted cash transfer programs, food subsidies, and other measures to cushion the effects on low-income households.
Encourage and incentivize investments in alternative energy sources to reduce the country’s dependence on fossil fuels. This could include increased funding for research and development in renewable energy technologies, as well as providing tax incentives for businesses and individuals engaged in clean energy projects.
Advocate for comprehensive public awareness campaigns to educate citizens on the reasons behind subsidy removal, the potential long-term benefits for the economy, and the accompanying measures in place to mitigate short-term challenges. Clear and transparent communication is crucial in gaining public support and minimizing resistance.
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