Impacts of Removing Refined Oil Import Subsidies in Nigeria on Poverty
نویسندگان
چکیده
The crude oil sector in Nigeria contributes substantially to the economy; however, these benefits are being compromised by significant subsidies on refined oil imports. The refined oil subsidy is paid primarily on imported fuel because domestic refineries cannot satisfy the national demand at current prices. Low fuel prices are considered an important benefit to the Nigerian people, where more than half the population lives in poverty in this oil rich country. The costs of these subsidies have been rising in recent years, due to volatile refined oil prices and the cost of corruption. Previous governments have attempted to remove the subsidy without success. Removing the fuel subsidy, therefore, remains one of the most intricate socio-economic policy issues in Nigeria. In this paper, we use an economy-wide framework to identify the impact of removing the fuel subsidy on the Nigerian economy. Policy alternatives that target certain households and promote domestic production of refined oil are discussed. The results show that accompanying a subsidy reduction with a transfer of income to poor households alleviate some of the negative impacts on households.
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