Fuel Subsidy Reforms and Macroeconomic Stability in Nigeria

This study examined the effects of fuel subsidy reforms on macroeconomic stability in Nigeria, with particular attention to the June 2023 petrol subsidy removal. It examined the short- and long-run effects of the reforms on inflation, economic growth, fiscal balance, exchange-rate stability and external reserves, and compared selected macroeconomic indicators between the pre-subsidy regime (January 2010–May 2023) and post-subsidy regime (June 2023–June 2026). The study was guided by five research questions and four null hypotheses. A quantitative ex-post facto research design was adopted using 198 monthly observations from January 2010 to June 2026. A census sampling technique was employed, covering all relevant observations. Data on the study variables were obtained from the Central Bank of Nigeria, National Bureau of Statistics, International Monetary Fund, World Bank and other recognised official sources. A researcher-designed data-extraction template was used for data collection and reviewed by three experts for face and content validity. Reliability was enhanced through cross-verification and consistency checks. Data were analysed using descriptive statistics, Augmented Dickey-Fuller unit-root tests, Autoregressive Distributed Lag (ARDL) estimation, short- and long-run analysis, and pre- and post-subsidy comparative analysis. Hypotheses were tested at the 0.05 significance level. The findings revealed that subsidy reforms significantly increased inflation and reduced economic growth in both the short and long run. Significant effects were also found on fiscal balance, exchange-rate stability and external reserves, while selected macroeconomic indicators differed significantly between the two regimes. The study concluded that fuel subsidy reform produced substantial and multidimensional macroeconomic effects. It recommends strengthened inflation management, improved fiscal transparency, support for productive sectors, coordinated exchange-rate management, and increased domestic refining and energy diversification.