Energy Subsidy Reforms, Social Contract and Poverty Reduction in Nigeria

The study examined the relation among energy subsidy, social contract and poverty in Nigeria covering the period 1999-2022. The study used autoregressive distributed lag (ARDL) model, dynamic ordinary least square (DOLS), and fully modified ordinary least square (FMOLS) approaches to determine the outcome of long-term estimates of the ARDL robustness. The unit root tests shows that the series were stationary at levels I(0) and first difference I(1). Cointegration was established with 2 optimal lag. The results of DOLS and FMOLS show that energy reforms of petrol motor spirit, automobile gas oil, dual purpose kerosene and electricity tariffs have impacted on high level of poverty in Nigeria. The reforms have also affected control variables like inflation and per capital income as inflation erodes the purchasing power of economic agents. The study suggests the need to deepen and implement short-to medium term fuel subsidy removal using market-based pricing as a necessity to protect the poor. This should be complemented by conversion plan from petroleum to natural gas (CNG) vehicles. Strategic policies to strengthen the voice and accountability by the citizens are required. It is essential to trust between government and citizens to strengthen social contract in a manner that improves service delivery, reduce corruption and strengthen institutions which will enhance subsidy reforms more feasible.