Fuel Subsidy Imbroglio and Economic Prosperity of Nigeria: A Dynamic Auto Regressive Distributed Lag (DARDL) Approach
DOI:
https://doi.org/10.59653/jbmed.v3i01.1422Keywords:
Fuel Subsidy Imbroglio, Economic Prosperity, Dynamic Auto Regressive Distributed Lag (DARDL) ApproachAbstract
This study evaluates the impact of fuel subsidy imbroglio on Nigeria's economic prosperity, covering the period from 1986 to 2022. In investigating the effect of oil subsidy on the economic prosperity of Nigeria, it uses RGDP as the regressed while the regressors are Subsidy Payment (SY). Additionally, Oil rent (RO), Exchange Rate (ER) and institutional variables such as Political stability (PS) and Control of Corruption (CO) served as control variables. To mediate the effect of subsidy, the institution of regulation was applied to moderate the nexus between subsidy payment and economic prosperity in Nigeria (SY*RQ). Data were obtained from secondary sources such as The Central Bank of Nigeria (CBN) Statistical Bulletin, the World Bank Development Index (WDI) and United States Energy Information Administration (USEIA). The dynamic autoregressive distributed lag (DARDL) model estimator tool was deployed for data analysis. The short-run result shows the magnitude of change in economic prosperity orchestrated by political stability. Also, corruption control was effective in the short run and encouraged economic prosperity. At the same time, oil subsidies harmed the country's economic prosperity; as the short-run coefficient implied, the effort to control subsidies directly using the institution of regulation (RQ) failed. Further, the normalized ARDL long-run test shows that the payment of oil subsidies has a minimal impact on economic prosperity in Nigeria. Similarly, when oil subsidy payment is subjected to regulations, its impact is still minimal. Notwithstanding, PS and LEX significantly promote economic prosperity in Nigeria. Based on the findings, the study recommends and supports the removal of fuel subsidies and that the proceeds should be re-invested in providing critical amenities and infrastructure to grow the Nigerian economy.
Downloads
References
Addeh, E.M. (2023). PWC: Why local refinery wont crash fuel prices. www.thisdaylive.com .
Akinsola, M. O., & Odhiambo, N. M. (2020). Asymmetric effect of oil price on economic prosperity: Panel analysis of low-income oil-importing countries. Energy Reports, 6, 1057-1066.
Drakopoulos, S. A. (2024). Value judgements, positivism and utility comparisons in economics. Journal of Business Ethics, 189(3), 423-437.
Engle, R. F. and Granger, C. W. J. (1987). Co-integration and Error Correction: representation, Estimation and Testing. Econometrica, 55: 251-276.
Gamette, P., & Oteng, C. (2024). Fuel subsidy removal in global south oil-producing economies: A review of literature. The Extractive Industries and Society, 18, 101468. 2000–2023
Husaini, D. H., Puah, C. H., & Lean, H. H. (2019). Energy subsidy and oil price fluctuation, and price behavior in Malaysia: A time series analysis. Energy, 171, 1000-1008.
Ighoroje, J. E., Ewiwile, S., Akan, D. C., Egugbo, R. U., & Agbogun, O. E. (2025). Economic policy mix: An imperative for monetary credibility in Nigeria. Multidisciplinary Science Journal, 7(2), 2025140-2025140.
Ighosewe, E. F., Akan, D. C., & Agbogun, O. E. (2021). Crude oil price dwindling and the Nigerian economy: A resource-dependence approach. Modern Economy, 12(7), 1160-1184.
Ikevuje, A. H., Kwakye, J. M., Ekechukwu, D. E., Ogundipe, O. B., & Esiri, A. E. (2024). Negative crude oil prices: Supply chain disruptions and strategic lessons. Open Access Research Journal of Multidisciplinary Studies, 8(01), 085-093.
Jatuporn, C. (2024). Assessing the impact of global oil prices on domestic price levels in Thailand: A nonlinear ARDL investigation. Energy Nexus, 100307.
Kumekawa, I. (2024). Measuring the Cost of Pollution: Economic Life, Economic Theory, and the Origins of Environmental Economics. The Journal of Modern History, 96(2), 332-361.
Leßmann, O., Otto, H. U., & Ziegler, H. (Eds.). (2011). Closing the capabilities gap: Renegotiating social justice for the young. Verlag Barbara Budrich.
Liu, J. J., Salleh, N. H. M., & Nor, N. G. M. (2024). The economy-wide impact of cooking oil subsidy reforms and compensation to the oil palm industry. Journal of Policy Modeling
Maduka, A.C., Ogwu, S.O. & Ekesiobi, C.S. (2022) Assessing the moderating effect of institutional quality on economic prosperity—carbon emission nexus in Nigeria. Environ Sci Pollut Res 29, 64924–64938. https://doi.org/10.1007/s11356-022-20346-3
Meludu, N. T., Komolafe, O. J., & Chilaka, P. C. (2024). Influence of fuel subsidy removal on the prices of major food commodities in southeastern Nigeria. West African Journal on Sustainable Development, 1(1), 23-39.
Mohammed, A., Yusuf, A. A., Mele, I. B., Yahaya, H., & Olowo-Oribi, F. A. (2024). Evaluating the Challenges and Prospects of Fuel Subsidy Removal on Nigeria's Economy. Kashere Journal of Politics and International Relations, 2(1), 271-279.
Obuareghe, G., Orubu, C. O., & Awogbemi, T. O. (2025). Macroeconomic Determinants of Exchange Rate Dynamics in Nigeria. Journal of Business Management and Economic Development, 3(01), 103–119. https://doi.org/10.59653/jbmed.v3i01.1191
Okonkwo, O. (2023). NNPCL spent ₦4.8 trillion running state owned refineries between 2010 and 2020. www.nairametrics.com, P.1
Parry, I., Black, M. S., & Vernon, N. (2021). Still not getting energy prices right: A global and country update of fossil fuel subsidies. International Monetary Fund.
Pesaran, M.H, T. Shin & Smith, R. J (2001). Bounds testing approach to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326.
PWC (2023). Fuel subsidy in Nigeria Issues, Challenges and the way forward. www.Pwc.com.ng. P.2
Raji, A. (2018). Fuel subsidy removal and the lives of rural dwellers in Nigeria. Unpublished Thesis. Department of Sociology, Faculty of Social Sciences, University of Ilorin, Ilorin, Nigeria.
Sulaimon, A. (2023). Why I ended fuel subsidy www.punchnewspaper,com. P.1
Uzoho, P. (2023). Nigeria imports refined petroluem products worth 28bn yearly. www.thisday.com. P.2
van den Bergh, J., van Beers, C., & King, L. C. (2024). Prioritize carbon pricing over fossil-fuel subsidy reform. iScience, 27(1), 1-4
Yohana, C., Mary, E. E., & Adamu, M. (2024). The effect of fuel subsidy removal on the economic activities in Niger state, Nigeria. Fuoye Journal of Public Administration and Management, 2(1), 24-32.
Yule, G. (1926). Why do we sometimes get Nonsense-Correlations between Time-Series? A Study in Sampling and the Nature of Time-Series. Journal of the Royal Statistical Society, 89(1),1-63.
Zhu, Q., Xu, C., Chen, Q., & Wu, L. (2024). Oil price distortion and its impact on green economic efficiency in China's transportation: A spatial effect perspective. Renewable and Sustainable Energy Reviews, 191, 114148.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Jude Okechukwu Dike, Goddey Obuareghe, Nathaniel Oke Eriemo

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-ShareAlike that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).