The Political Economy of Fuel Subsidy Removal: Governance and Sustainable Development in Nigeria
Abstract
The removal of fuel subsidies in Nigeria has sparked widespread debate concerning its implications for governance, economic stability, and public welfare. This study investigates the governance dynamics influencing the removal of subsidies and examines its economic and social consequences based on data from 385 respondents in Bida, Niger State. A binary logit regression model was employed to evaluate the economic, social, political, and external factors that shape policy outcomes. The findings reveal that while the removal of subsidies aims to alleviate fiscal pressure and enhance economic efficiency, it has led to inflation and disproportionately affected low-income households, exacerbating inequality. Socially, the policy has fueled public discontent, particularly due to increased transportation and living costs, with government palliatives being viewed as inadequate. Politically, weak governance structures, lack of transparency, and persistent corruption have eroded public trust, complicating the legitimacy and acceptance of the policy. These outcomes underscore the pivotal role of governance in the effectiveness of policy. To mitigate negative effects and enhance policy impact, the study recommends targeted subsidies for vulnerable groups, investment in affordable public transportation, and institutional reforms to enhance transparency and accountability in managing subsidy savings. Aligning governance practices with socio-economic realities is critical to ensuring equitable and sustainable economic reforms.
Keywords: fuel subsidy; governance; sustainable development; Nigeria; economic policy.
Abstrak
Penghapusan subsidi bahan bakar di Nigeria telah memicu perdebatan luas mengenai implikasinya terhadap tata kelola, stabilitas ekonomi, dan kesejahteraan publik. Penelitian ini menyelidiki dinamika tata kelola yang mempengaruhi penghapusan subsidi dan menganalisis konsekuensi ekonomi dan sosialnya berdasarkan data dari 385 responden di Bida, Negara Bagian Niger. Model regresi logit biner digunakan untuk mengevaluasi faktor-faktor ekonomi, sosial, politik, dan eksternal yang membentuk hasil kebijakan. Temuan penelitian menunjukkan bahwa meskipun penghapusan subsidi bertujuan untuk mengurangi tekanan fiskal dan meningkatkan efisiensi ekonomi, kebijakan ini telah menyebabkan inflasi dan secara tidak proporsional membebani rumah tangga berpendapatan rendah, yang memperburuk ketimpangan. Secara sosial, kebijakan ini telah meningkatkan ketidakpuasan publik, terutama karena naiknya biaya transportasi dan kebutuhan hidup, dengan palliatives pemerintah yang dianggap tidak memadai. Secara politik, struktur tata kelola yang lemah, kurangnya transparansi, dan korupsi yang terus-menerus telah mengikis kepercayaan publik, sehingga memperumit legitimasi dan penerimaan kebijakan tersebut. Hasil penelitian ini menyoroti peran penting tata kelola dalam efektivitas kebijakan. Untuk mengurangi dampak negatif dan memperkuat dampak kebijakan, penelitian ini merekomendasikan subsidi yang terarah bagi kelompok rentan, investasi dalam transportasi publik yang terjangkau, serta reformasi kelembagaan untuk meningkatkan transparansi dan akuntabilitas dalam pengelolaan tabungan subsidi. Menyelaraskan praktik tata kelola dengan realitas sosial-ekonomi sangat penting untuk memastikan reformasi ekonomi yang adil dan berkelanjutan.
Kata kunci: subsidi bahan bakar; tata kelola; pembangunan berkelanjutan; Nigeria; kebijakan ekonomi.
Abu, I., Mohammod, U., Muhammad, M., & Ahmed, S. (2024). Effect of fuel subsidy removal on socio-economic development of Chanchaga Local Government Area of Niger State. Kashere Journal of Politics and International Relations, 2(2), 340–354.
Adebiyi, M., & Mordi, C. (2012). A dynamic stochastic general equilibrium (DSGE) model of exchange rate pass-through to domestic inflation in Nigeria. ECOMOD Conference 2012.
Adenikinju, A. (2021). Fuel subsidy in Nigeria: Costs, benefits, and policy options. Journal of Energy Policy Research, 14(2), 123-138.
Adeoye, A. (2024, February 26). Nigeria’s economic crisis puts fuel subsidies removal under scrutiny. Financial Times. Retrieved from https://www.ft.com/content/29752a06-adea-4175-b278-22e0632c375a
Ajakaiye, O., & Fakiyesi, O. (2019). Managing fuel subsidy reforms in Nigeria: Socioeconomic and policy implications. African Economic Review, 17(3), 45-67.
Antimiani, A., Costantini, V., & Paglialunga, E. (2023). Fossil fuels subsidy removal and the EU carbon neutrality policy. Energy Economics, 119, 106524.
Black, S., Liu, A. A., Parry, I., & Vernon, N. (2023). IMF fossil fuel subsidies data: 2023 update. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4585306
BudgIT. (2023). Nigeria's subsidy expenditure and economic alternatives. BudgIT Research Publication.
Cerin, P. (2006). Bringing economic opportunity into line with environmental influence: A discussion on the Coase theorem and the Porter and van der Linde hypothesis. Ecological Economics, 209–225.
Coxhead, I., & Grainger, C. (2018). Fossil fuel subsidy reform in the developing world: Who wins, who loses, and why? Asian Development Review, 35(2), 180–203. https://doi.org/10.1162/adev_a_00119
Dernbach, J. C. (2003). Achieving sustainable development: The centrality and multiple facets of integrated decision-making. Indiana Journal of Global Legal Studies, 10(2), 247–285.
Evans, O., Nwaogwugwu, I., Vincent, O., Wale-Awe, O., Mesagan, E., & Ojapinwa, T. (2023). The socio-economics of the 2023 fuel subsidy removal in Nigeria. BizEcons Quarterly, 17, 12–32.
Gana, M. I., Rabi, T. A., & Nura, M. B. (2024). Implications of fuel subsidy removal on Nigeria’s sustainable development. Nigerian Journal of Management Sciences, 25(1), 279–286.
Greve, H., & Lay, J. (2023). "Stepping down the ladder": The impact of fossil fuel subsidy removal in a developing country. Journal of the Association of Environmental and Resource Economists, 10(1), 121–158.
IEA. (2021). Fossil fuel subsidies database. IEA Fossil Fuel Subsidies Database. Retrieved from https://www.iea.org/data-and-statistics/data-product/fossil-fuel-subsidies-database#overview
IISD. (2014). Subsidies to liquefied petroleum gas in India: An overview of recent reforms (Issue March). International Institute for Sustainable Development. Retrieved from https://www.iisd.org/gsi/sites/default/files/ffs_india_lpg_overview_2014.pdf
Ikenga, F. A., & Aluka, S. (2023). Benefit and challenges of fuel subsidy removal on Nigeria economy of fourth republic. Hampstead Psychological Associates, 24(7), 11222–11236.
International Monetary Fund (IMF). (2023). Nigeria: Fiscal policy and public finance review. Washington, D.C.: IMF Publications.
International Monetary Fund (IMF). (2024). Nigeria post–financing assessment discussions: Press release and staff report. IMF Country Reports, 24(49). Retrieved from https://www.elibrary.imf.org/journals/002/2024/049
Mustapha, A. R. (2018). Identity politics and social mobilization in Nigeria. Oxford University Press.
Nigeria Extractive Industries Transparency Initiative (NEITI). (2022). Nigeria’s oil revenue and subsidy burden: A transparency report. Abuja: NEITI.
Nwankwo, C., & Ibrahim, F. (2020). Social movements and policy change in Nigeria: The case of #OccupyNigeria. African Studies Quarterly, 18(3), 45–60.
Okafor, C. (2023, November 8). 4 months in and here’s how much Nigeria has saved on fuel subsidies. Business Insider Africa. Retrieved from https://africa.businessinsider.com/local/markets/4-months-in-and-heres-how-much-nigeria-has-saved-on-fuel-subsidies/p9s0g5e
Okafor, T. (2022). Measurement challenges in assessing social dynamics: A case study of Nigerian household surveys. Development in Practice, 32(4), 512–525.
Omotosho, B. S. (2019). Oil price shocks, fuel subsidies and macroeconomic (in)stability in Nigeria. Retrieved from https://ssrn.com/abstract=3771007
Olawale, A., & Okonkwo, C. (2020). The political economy of subsidy removal in Nigeria: A review of public protests and government responses. Nigerian Journal of Public Administration, 11(1), 89-105.
PWC. (2023). Fuel subsidy in Nigeria – Issues, challenges, and the way forward. Price Waterhouse Coopers Nigeria. Retrieved from https://www.pwc.com/ng/en/assets/pdf/fuel-subsidy-in-nigeria-issues-challenges-and-the-way-forward.pdf
Reuters. (2024, October 10). Nigeria’s NNPC raises fuel prices as it ditches costly subsidies. Reuters. Retrieved from https://www.reuters.com/business/energy/nigerias-nnpc-raises-fuel-prices-it-ditches-costly-subsidies-2024-10-10/
Statista. (2023). Impact of fuel subsidy removal on Nigerian households. Retrieved from https://www.statista.com/statistics/1417039/nigeria-fuel-subsidy-removal-impact/
World Bank. (2023). Nigeria development update December 2023: Turning the corner – From reforms to renewed hope, to results. World Bank. Retrieved from https://documents1.worldbank.org/curated/en/099121223114542074/pdf/P5029890fb199e0180a1730ee81c4687c3d.pdf
Copyright (c) 2025 Author
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Jurnal Governance and Administrative Reform by Unair is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
1. The journal allows the author to hold the copyright of the article without restrictions.
2. The journal allows the author(s) to retain publishing rights without restrictions
3. The legal formal aspect of journal publication accessibility refers to Creative Commons Attribution Share-Alike (CC BY-SA).
