Macroeconomic and Welfare Implications of Fuel Subsidy Removal on Inflation, Poverty, and Economic Stability in Nigeria

Jacob, Augustine O; Umoh, Okon Joseph; Ekott, Emem O

doi:10.48308/jep.2026.246246.1292

Macroeconomic and Welfare Implications of Fuel Subsidy Removal on Inflation, Poverty, and Economic Stability in Nigeria

Articles in Press

Document Type : Original Article

Authors

Augustine O Jacob ¹

Okon Joseph Umoh ²

Emem O Ekott ¹

¹ Department of Business Administration, School of Management Science, Heritage Polytechnic, Ikot Udota,Eket, Nigeria

² Department of Economics, University of Uyo, Uyo, Nigeria

10.48308/jep.2026.246246.1292

Abstract

Fuel subsidy reform remains a central issue in Nigeria’s macroeconomic and social-policy debate because changes in the domestic price of premium motor spirit (PMS) affect transport costs, production costs, household purchasing power, and public finances. This study reviews evidence published from 2000 to 2025, with priority given to studies and institutional reports from 2020–2025 and to evidence following the May 2023 reform. A structured narrative review, informed by PRISMA 2020 reporting principles, thematic synthesis, and a non-prescriptive multi-criteria policy framework was used to organize heterogeneous evidence on inflation, poverty and welfare, fiscal sustainability, and economic stability. The evidence indicates that higher PMS prices were associated with sharp short-run increases in transport costs and coincided with rising headline inflation, although exchange-rate depreciation, food-supply constraints, and other macroeconomic shocks also contributed. Welfare effects are strongest where households face high food and transport expenditure shares and weak social protection. Fiscal effects are potentially favorable when explicit or implicit subsidy costs are reduced, but realized gains depend on the effective price regime, oil-sector accounting, and the use of public savings. The review therefore emphasizes trade-offs rather than a single preferred policy option and identifies transparent fiscal management, well-targeted social protection, credible monetary policy, and productivity-enhancing public investment as key conditions shaping outcomes.

Keywords

Energy price shocks

Fiscal consolidation

Cost-push inflation

Social protection mechanisms

Economic restructuring

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