Insightful information on fossil fuel subsidy removal, exchange rate, inflation, and economic welfare: Evidence from Nigeria
Keywords:
Economic welfare, Exchange rate, Fossil Fuel Subsidy Removal, Inflation, Vector- Error Correction Model.Abstract
Over the years, the economic welfare of many Nigerians and the economy of Nigeria has been poor. This has in turn affected Nigeria's economic prosperity and living standards. The sudden elimination of fuel subsidies in Nigeria, without implementing protective measures first, has hindered the government's ability to achieve the policy's long-term goals: fiscal stability, increased investment in productive sectors of the economy, economic growth, and support for renewable energy. The first objective of this study is to evaluate the Long-run equilibrium impact between fossil fuel subsidy removal, exchange rate, inflation rate and economic welfare in Nigeria. The second objective of the study is to examine the short-run dynamics between fossil fuel subsidy removal, exchange rate, inflation rate and economic welfare in Nigeria. The ex post facto research design was utilized for this study. The estimation method utilized for this study is the Vector Error Correction Model. Data for the study span from 1992-2023.This study discovered that Fossil fuel subsidy removal, and Inflation has a negative insignificant effect on economic welfare in the short-run, while Exchange rate has a positive insignificant effect on economic welfare in the long-run. In the long-run, Fossil fuel subsidy removal and Inflation has a negative significant influence on economic welfare in the long-run, while Exchange rate has a positive significant effect on economic welfare. The study recommends that Nigeria Government should promote investment in domestic refineries to lessen reliance on imported petroleum products and to alleviate the effects of fluctuations in global oil prices.
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