Abstract
Research Objective: This study explores the relationship between fuel subsidies and sustainable economic development in Nigeria, focusing on the effects of fuel prices and fuel consumption.
Methodology: Drawing on secondary data from the Central Bank of Nigeria (CBN) spanning from 1981 to 2023, an Autoregressive Distributed Lag (ARDL) model was used to analyze the impact of fuel prices and fuel consumption on Nigeria’s real GDP (RGDP).
Findings: The results reveal that fuel price adjustments have a positive and statistically significant long-run relationship with economic growth, suggesting that reducing fuel subsidies or increasing fuel prices could enhance economic development by improving resource allocation and fiscal space. However, in the short run, fuel prices do not significantly impact economic growth. Conversely, fuel consumption shows a negative yet statistically significant effect, indicating inefficiencies in fuel use.
Recommendations: The study highlights the need for comprehensive energy reforms, suggesting that fuel subsidies must be managed strategically, with an emphasis on improving fuel efficiency and diversifying energy sources. Policymakers should consider gradual subsidy removal, paired with social safety nets to mitigate the adverse effects on low-income households, ensuring that fuel consumption supports productive sectors. The findings underscore the importance of long-term planning and careful management of fuel subsidy policies to support Nigeria’s sustainable economic development.
Key words: Fuel subsidies, sustainable development, Nigeria, fuel prices, fuel consumption.
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