Authors : Adebanwa, Ayowole Abayomi; Olaosebikan, Oluwadamilola Ilerioluwa; Taiwo Adeola Oluwabunmi; Alabi, Opeyemi Enitan

Volume/Issue : Volume 11 - 2026, Issue 4 - April

Google Scholar : https://tinyurl.com/2cde2xwn

Scribd : https://tinyurl.com/bdp2rmz4

DOI : https://doi.org/10.38124/ijisrt/26apr1277

Note : A published paper may take 4-5 working days from the publication date to appear in PlumX Metrics, Semantic Scholar, and ResearchGate.

Abstract : This study aims to examine the impact of fuel subsidy removal on Nigeria’s economic trajectory. We hypothesized that the removal of petroleum subsidies does not generate inflationary pressures and test this hypothesis using the Dynamic Simulated Autoregressive Distributed Lag (DS-ARDL) framework. The outcome of the study shows that fuel-subsidy removal has a significant impact on the cost of living and inflation level in Nigeria, indicating that as 1 unit of subsidy removal increases, the cost of living and inflation level increase by 73.8%To address these challenges, the government began promoting alternative energy sources such as Compressed Natural Gas (CNG), solar energy, and Liquefied Petroleum Gas (LPG). These alternatives are cheaper and more sustainable in the long run. This paper therefore examinesd how domestic refining and energy diversification can help Nigeria achieve economic stability and energy security in the post-subsidy era. Based on existing data, prior to 2023, domestic refining remained extremely low. However, the emergence of new private refining capacity, with the establishment and operation of the Dangote Refinery and refinery rehabilitation programs has begun to increase domestic refining activities. Strengthening domestic refining capacity through continued investment; expanding renewable energy development, particularly solar power; improving regulatory stability to attract private sector participation; developing gas-based industrialization to support energy diversification and investing in energy infrastructure including pipelines and storage facilities were recommended.

Keywords : Domestic Refining, Dynamic Stimulated Autoregressive Distributed Lag (DS-ARDL), Energy Diversification, Fuel Subsidy.

References :

1. Addeh, E. (2024). For the first time in 28 years Nigeria begins production of petrol at Dangote refinery. This Day. https://www.thisdaylive.com⁠.
2. Adewuyi, A. O., and Adeleke, A. M. (2017). Effect of Economic Diversification on Energy and Carbon Efficiency in Oil Rich Economies: Empirical Evidence from Nigeria. Nigerian Journal of Economic and Social Studies, 59(2), 249-273.
3. Akintayo, O. (2024). Nigeria splashes N12trn on petroleum products in one year – NBS. Channels Television.https://www.channelstv.com/2024/03/29/nigeria-splashes-n12trn-on-petroleum-products-in-one-year-nbs
4. Ajuwon, O., and Abiodun, K. J. (2025). Impact of fuel subsidy removal on the cost of living in Nigeria. Journal of Smart Economic Growth, 10(3), 77-116.
5. Auty, R. M. (1995). Economic development and the resource curse thesis. In Economic and political reform in developing countries (pp. 58-80). London: Palgrave Macmillan UK.
6. Chenery, H. B. (1983). Interaction between theory and observation in development. World Development, 11(10), 853-861.
7. Evans, O., and Nwaogwugwu, I. (2023). The socio-economics of the 2023 fuel subsidy removal in Nigeria (MPRA Paper No. 118360). Munich Personal RePEc Archive. https://mpra.ub.uni-muenchen.de⁠\.
8. Gil-Alana, L. A., and Umeh, S. C. (2021). Energy and Economic Development in Nigeria: An Econometric Approach based on Fractional Integration. Risk and Financial Management, 3(2), p15-p15.
9. Humphreys, M., Sachs, J., & Stiglitz, J. E. (Eds.). (2007). Escaping the resource curse. Columbia University press.
10. Ikenga, F., and Oluka, N. (2023). Politics of fuel subsidy regime in Nigeria and its implications: An assessment of President Bola Ahmed Tinubu's administration. International Journal of Research and Innovation in Social Science, 7(9), 114–128. https://doi.org⁠.
11. Lewis, W. A. (1954). Economic development with unlimited supplies of labour.
12. National Bureau of Statistics. (2024). Gross domestic product report: Q2 2024. https://www.nigerianstat.gov.ng⁠
13. Ndiomaluke, C., Obi, C., Orajaka, U., Ejefobihi, U., and Percy, N. (2025). Economic diversification strategies for sustainable development in Nigeria. Journal of Policy and Development Studies, 18(3), 1-23.
14. Nigerian Upstream Petroleum Regulatory Commission. (2025). The future of Nigeria’s petroleum industry: Upstream gaze magazine (Vol. 9). https://www.nuprc.gov.ng
15. Obele, J. D. (2025). Effects of Government Policy Frameworks on the Diversification from Crude Oil to Alternative Energy in Nigeria  Bush Wealth https://www.bwjournal.org/index.php/bsjournal/issue/view/1
16. Okonkwo, O. (2023). Petroleum subsidy and the future of Nigeria's oil sector: From consumer relief to market deregulation. Journal of Energy Reform, 12(4), 45–59. https://www.researchgate.net⁠
17. Olaniwun Ajayi LP. (2025). Oil and gas outlook: 2024 highlights and 2025 outlook. https://www.olaniwunajayi.net. ⁠
18. Ozili, P. K., and Obiora, K. (2023). Implications of fuel subsidy removal on the Nigerian economy.
19. In Public policy’s role in achieving sustainable development goals (pp. 115-130). IGI Global Scientific Publishing.
20. Ross, M. L. (2013). The oil curse: How petroleum wealth shapes the development of nations. Princeton University Press.
21. Sachs, J. D., and Warner, A. M. (2001). The curse of natural resources. European economic review, 45(4-6), 827-838.
22. Karl, T. L. (1997). The paradox of plenty: Oil booms and petro-states (Vol. 26). Univ of California Press.
23. Wakili, S. G., Abubakar, Y., Adamu, M. B., & Jajere, A. A. (2025). Economic Diversification through Solid Minerals Sector in Nigeria: Potentials, Challenges and Prospect. UMYUK Journal of Economics and Development, 2(2), 1-14.⁠
24. World Bank. (2024). Staying the course on reforms: Progress amidst challenges (Nigeria Development Update). https://www.worldbank.org⁠.
25. World Bank. (2025). Nigeria development update: Seizing the opportunity. World Bank Group. https://www.worldbank.org⁠
26. Yahaya, A. (2025). Fuel prices, subsidy removal and macroeconomic volatility in Nigeria (2018– 2024). IIARD International Journal of Economics and Business Management, 12(2), 304–318. https://iiardjournals.org
27. Yunusa, E., Yakubu, Y., Emeje, Y. A., Ibrahim, Y. B., Stephen, E., and Egbunu, D. A. (2023). Fuel subsidy removal and poverty in Nigeria: A literature review. GPH-International Journal of Applied Management Science, 4(09), 14-27.