Fuel Subsidy Removal and Living Costs in Nigeria (1986–2025)

Nigeria's decision to remove its long-standing fuel subsidy regime—most consequentially in May 2023—triggered one of the most disruptive economic shocks in the country's post-independence history. This study empirically investigates the relationship between fuel subsidy removal and household living costs in Nigeria over the period 1986 to 2025, incorporating a rich array of control variables: inflation rate, exchange rate, GDP growth rate, income level, household size, urban/rural location, social welfare programs, alternative energy policies, international fuel prices, and transportation costs. Using an Autoregressive Distributed Lag (ARDL) bounds testing approach and Error Correction Model (ECM), the study establishes both short-run and long-run dynamics between subsidy policy shifts and the cost-of-living index for Nigerian households. The results confirm that fuel subsidy removal exerts a statistically significant positive effect on household living costs in both the short and long run, with the burden falling disproportionately on low-income, large-household, and rural populations. Transportation costs and exchange rate depreciation emerge as the strongest amplifying channels. Social welfare programs and alternative energy policies demonstrate modest but statistically significant buffering effects. The study contributes to the sparse empirical literature on subsidy reform in Sub-Saharan Africa and offers concrete policy recommendations for cushioning the welfare impact of subsidy removal while sustaining fiscal consolidation gains.