Fuel Subsidy Removal And Poverty Incidence In Nigeria

This study examined the effect of fuel subsidy removal on poverty incidence in Nigeria for the period 2005 to 2024. The study adopted an ex post facto research design and relied on secondary data sourced exclusively from the National Bureau of Statistics (NBS) Statistical Bulletin and publications. The analytical techniques employed included descriptive statistics, trend analysis, correlation analysis, and Ordinary Least Squares (OLS) regression. The Cost-Push Inflation Theory, as developed in the post-Keynesian economics literature, was adopted as the theoretical framework. Findings revealed that fuel price increases — the primary mechanism through which subsidy removal operated — had a significant and positive effect on poverty incidence in Nigeria. Specifically, OLS regression results showed that all four independent variables were statistically significant determinants of poverty incidence, with the model explaining 78.4 percent of the variation over the 2005–2024 period (R² = 0.784, F = 21.84, p = 0.000). Correlation analysis showed that exchange rate had the strongest positive association with poverty (r = 0.712), followed by fuel price (r = 0.641), unemployment (r = 0.528), and inflation (r = 0.349). Trend analysis showed that poverty incidence rose consistently following major subsidy removal episodes — peaking in 2012, 2016, and sharply again between 2023 and 2024, when the poverty headcount ratio climbed from 63.0 percent to 67.1 percent as fuel prices surged from ₦195.00 to ₦895.00 per litre. Inflation, unemployment, and exchange rate depreciation further compounded the poverty impact by eroding household purchasing power and raising the cost of essential goods and services. The study recommended that any future energy pricing reform be accompanied by well-targeted social protection programmes, transparency in the management of fiscal savings, and investment in critical infrastructure to cushion the welfare impact on vulnerable Nigerians.