and–accounted for just above 20-25% of the total GDP in the 1980s, and 70% of the budgetary revenue.Oil subsidy exists when consumers would pay the market price per litre of petroleum product, less than the actual price. From September 1986, the government decided to gradually withdraw its subsidy on petroleum products. Notwithstanding this situation, majority of the Nigerians continue to clamor for further subsidy removal in the downstream oil sector of the Nigerian economy. This research aimed to analyse the impact of petrol subsidy removal on the economic performance of Nigeria, and to determine if the petrol consumption (demand) affects the national income (GDP).The analysis was conducted using the multiple regression econometric approach, with income being a function of the domestic pump price of petrol as well as petrol subsidy and consumption, which indicates that an increase in the consumption of petrol positively impacts economic growth, generating additional oil revenues that can be used to boost economic development. A further research was conducted using time series analysis to observe the effects of the variables over time.Economic performance can also be enhanced through policy comparisons with other oil-producing developing countries that successfully adapted the full subsidy withdrawal scheme. Policies based on the further development of abundant alternative energy resources will broaden their availability and will boost the economic development. It will also minimize energy wastage and carbon emissions due to the availability of cheap oil, and will save enough oil to meet the future increases in the oil demand.
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Econometric Analysis on the Impact of Petrol Subsidy on the Economic Performance of Nigeria
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