...Function Application: Enlightment to the Impact of Fuel Subsidy Removal in Nigeria Abang I. S.*, Elufisan T.O., Okwubunne A. C. National Centre for Technology Management, an Agency of the Federal Ministry of Science & Technology, Obafemi Awolowo University, Ile-Ife, Nigeria Abstract This paper adopts a linear function approach to analyse the effect of fuel subsidy removal on the value of Nigerian Naira and local production in the country. Data for about eight different periods where fuel hike occurred in Nigeria was used, and a mathematical model with the aid of a graph, was also developed to aid estimated calculation of Naira’s value. We also deduced from this study that increase in fuel pump price has an adverse effect on the standard of living of the people, since fuel is essential for the transportation of major Nigerian commodities, such as Agricultural produce and other market product. The significant impact of the upsurge of petroleum pump price on the price of goods transport initiates this study; with the aim of checking its effect on the purchase value of naira. Though this study is totally neutral about the subsidy removal, its just to enlighten us on the topic and let viewers decide. Keywords GDP, Subsidy, Data, Scarcity calls for a quick intervention. In a bid to averting the continual occurrence of this problem, Nigeria government have decided to intervene by deregulating the petroleum sector in the form of subsidy removal. The aim of the government for doing this is...
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...Implications of Fuel Subsidy to Nigerian Economy Babandi Ibrahim Gumel Doctor of Business Administration California Southern University Mike Ewald, PhD November 2015 Introduction This paper would discuss the implications of fuel subsidy in the Nigerian economy. It is a position paper as an extra credit assignment for ECO 87501 for DBA course at California Southern University. The paper would review what subsidy is, the reason for subsidizing petroleum product in Nigeria, challenges the Nigerian economy is facing because of subsidizing petroleum products, and the crisis the country is facing because of subsidy. Analysis According to the dictionary of Investopedia, “subsidy is a benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is given to remove some burden and is often considered to be in the interest of the public. Politics plays an important part in subsidization. In general, the left is more for having subsidized industries, while the right feels that industry should stand on its own without public funds” (Investopedia, 2015, p. 1). The above definition clearly indicates that the subsidy is a kind of free money in whatever form given to the public by Government. It is worth noting that the definition highlighted that politics plays a role in subsidy, and politicians on the left, (e.g. in U. S. the Democrats) favor subsidy. The Merriam-webmaster dictionary defines subsidy as “money that is...
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...are removing fuel subsidies, which has caused riots and protests throughout the country. The effect that this will have on the demand for fuel is explained in this report, using the demand and supply model and also the priced determinants of demand. The report also explains the effect the removal of the subsidies will have on the revenue of the people supplying the fuel. The increase in fuel prices has a flow on effect increasing the prices of other goods which use fuel in their production. Question 1 The supply and demand model shows that when supply and demand quantities are balanced we have an equilibrium price. Once the price increases over this equilibrium price the demand decreases and supply increases which results in a surplus of good. When the price drops and demand increases it results in a shortage of goods. This is shown in diagram 1 below. Diagram 1 (Word Press 2011) The removal of the subsidy will mean there is an increase in the price of fuel making it too expensive for many consumers and therefore decreasing demand which may result in a surplus of fuel. Question 2 A “Elasticity of demand is a measure of how responsive consumers demand is to a change in the price of a product” (Jackson et al 2012, page 61). Inelastic demand occurs when the change in the price of a product has little impact on the quantity demanded. The price elasticity of demand for fuel in Nigeria is inelastic, as the increase in price from the removal of the subsidy would have little...
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...Working Paper Series DOES SUBSIDY REMOVAL HURT THE POOR by Manson NWAFOR Kannayo OGUJIUBA Robert ASOGWA Les Cahiers du SISERA – 2006 / 2 AFRICAN INSTITUTE FOR APPLIED ECONOMICS (AIAE) DOES SUBSIDY REMOVAL HURT THE POOR by Manson NWAFOR1 Kannayo OGUJIUBA Robert ASOGWA This research was undertaken with the financial support of the United States Agency International Development (USAID) and the International Development Research Centre (IDRC), Ottawa, Canada February 2006 1 Corresponding author. Contact is: mansonnwafor@yahoo.com AVANT-PROPOS Le Secrétariat d’Appui Institutionnel à la Recherche Économique en Afrique (SISERA) a pour mission de faciliter l’émergence de centres d’excellence en recherche économique en Afrique subsaharienne et de les aider à jouer un rôle effectif dans le processus d’élaboration des politiques économiques. Un des objectifs du Secrétariat est d’aider les centres à disséminer les résultats de leurs travaux de recherche. Les Cahiers du SISERA ont donc été créés pour permettre une meilleure diffusion des travaux de recherche des Institutions partenaires du Secrétariat. La présente édition des Cahiers du SISERA est consacrée à diffusion des résultats des études conduites par six Institutions partenaires du SISERA dans le cadre du programme de formation et de recherche en économie dénommé « Stratégies et analyses pour le développement et l’accès à la croissance (SAGA) » mis en place par l’USAID et administré par SISERA. L’objet de ce programme...
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...NAME: Fatmah Ibrahim CLASS: SS 3A SUBJECT: Economics Topic: The Effect of subsidy in Nigeria Economy THE EFFECTS OF SUBSIDY IN NIGERIA ECONOMY. DEFINATION A subsidy is an assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributed as subventions in an industry to prevent the decline of that industry (e.g., as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire more labor (as in the case of a wage subsidy). Examples are subsidies to encourage the sale of exports; subsidies on some foods to keep down the cost of living, especially in urban areas; and subsidies to encourage the expansion of farm production and achieve self-reliance in food production.[1] EFFECTS OF SUBSIDY REMOVAL In a country of power instability the removal of fuel subsidy has triggered double in the price of fuel . 1. increased price of fuel and other petroleum product 2. increase in transport fares 3. increased price of food products. The Lagos Chamber of Commerce and Industry (LCCI) has listed some of the adverse effects of the Federal Government's recent policy to deregulate the nation's downstream oil sector LCCI, in a statement, said the policy has led to fresh inflationary pressures resulting from sharp increases in transportation cost, high inflationary expectations across all sectors of the economy, and a devastating impact on the psyche of the common people...
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...illustrate what sort of analysis is expected. Topic Selected: Economic Welfare Fuelling Controversy The Economist 11 January 2014 Overview of Article Many governments subsidise fuel consumption. However, many countries that currently subsidise fuel are starting to reverse course. In June 2013, Indonesia increased fuel prices by 44% and decreased their total subsidy cost by $20 billion annually. Malaysia also reduced fuel subsidies – household energy bills increased by 15% as a result. Egypt and India are considering following suit. The key rationale to these governments of removing subsidies was to decrease the budget deficit. Effects of Fuel Subsidy According to Article The article discusses that there are many other benefits to reducing fuel subsidies. o Fuel subsidies generate deadweight loss. o Fuel subsidies make inequality worse – it is mostly the rich that benefit (the rich use fuel disproportionately more). o Removal of fuel subsidies will allow the government to develop infrastructure. These policies are unpopular, however, and many in Indonesia and Malaysia protested the new policies. Fuel Prices around the World Indonesia and Malaysia have some of the largest fuel subsidies and lowest fuel prices in the world. Analysis of Welfare Effects of Fuel Subsidy This article discusses that there are deadweight losses...
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...government subsidies. This paper will discuss an industry that is subsidized by the U.S. government and address the following: why the U.S. government subsidizes the industry, how the subsidy alters the market outcome, who gains and who loses from the government intervention, any beggar-thy-neighbor issues, and why the subsidy is or is not justified. Introduction Many industries rely on government assistance in both good times and bad. “The potential micro and macro failures of the marketplace provide specific justifications for government intervention” (Schiller, 2010). Government interventions “encompass a wide range of regulatory, fiscal, tax, and legal actions that modify the rights and responsibilities of various parties in society. Interventions can increase or decrease costs to particular groups, effectively acting either as a subsidy or as a tax” (Subsidies and Market Interventions, 2013). Since the 1930’s the government’s role has assumed more responsibilities including “maintaining macroeconomic stability, protecting the environment, and safeguarding the public’s health” (Schiller, 2010). Government Intervention A government subsidy is defined as “monetary assistance granted by a government to a person or group in support of an enterprise regarded as being in the public interest” (Subsidy, 2013). An example of an industry that is subsidized by the U.S. government is the energy market, specifically related to the costs of fuel. Government subsidies are common...
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...by grid electricity. Policies needed to implement renewable energy systems in rural areas are discussed in this paper. Most prominent are removal of subsidies to traditional energy primarily benefiting the wealthiest; involving the local populace in decision making; educating financial institutions about the economics of investing in renewable energy systems and creating investment vehicles appropriate to financing them in poor localities; training personnel on management, maintenance and drafting contracts; requiring vendor provision of maintenance and parts; and effective regulation and oversight of system management and financing. I. Introduction The recent sharp increases in the prices of oil, natural gas, uranium and coal underline the importance for all countries to focus on development of alternative energy resources. For developing countries, these price increases can have ruinous economic consequences; for many countries already plagued by poverty this means a choice between fuel and food, health care, education and other essentials. Renewable energy resources need priority because: 1) the overwhelming scientific evidence that anthropological emissions of greenhouse gases from carbon combustion threaten catastrophic results from rapid climate change; 2) the severe health and environmental consequences from fossil fuel combustion being experienced...
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...Indonesia’s Fuel Subsidies: Action plan for reform David Braithwaite Alexander Chandra Prasetyaning Diah R. L. Ami Indriyanto Kerryn Lang Lucky Lontoh Nataliawati Siahaan Damon Vis-Dunbar Bobby A. Wattimena Unggung Widhiantoro Peter Wooders NE SI A N I N S TI TU T E F OR E N E RG IN DO I I EE FO U N D AT I O N C O NOM I YE CS March 2012 www.iisd.org/gsi © 2012 The International Institute for Sustainable Development © 2012 The International Institute for Sustainable Development Published by the International Institute for Sustainable Development. About IISD The International Institute for Sustainable Development (IISD) contributes to sustainable development by advancing policy recommendations on international trade and investment, economic policy, climate change and energy, and management of natural and social capital, as well as the enabling role of communication technologies in these areas. We report on international negotiations and disseminate knowledge gained through collaborative projects, resulting in more rigorous research, capacity building in developing countries, better networks spanning the North and the South, and better global connections among researchers, practitioners, citizens and policy-makers. IISD’s vision is better living for all—sustainably; its mission is to champion innovation, enabling societies to live sustainably. IISD is registered as a charitable organization in Canada and has 501(c)(3) status in the United...
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... Experts believe the cash-less Policy would curb corruption but may increase price level in the short – term By Goke Awoyemi The Managing Director of Financial Derivatives Company Limited, Mr. Bismark Rewane, has said that the cash-less policy the central Bank of Nigeria will increase price level in the short term. The policy commenced in Lagos last month. There has been debate by different observers of Nigeria’s financial system over the effects the cash-less policy and fuel subsidy removal will have on inflation. While some observers have argued that inflation rate will shoot up to an average of 20 per cent in 2012, others have said the rise in inflation rate will only exist in the short term. Rewane said in a report entitled, “Fuel Subsidy Saga,” delivered at the Lagos Business School, that one of the macro-economic effects of the cash-less policy is that price level would increase in the short-run, adding that, “inflation could average 12 to 14 per cent in 2012 due to subsidy impact.” He said, “Short-run effect is that money supply will decline by 50 per cent to N2.5tn and broad money supply (M2) will increase to N18.5tn. Velocity of circulation will increase due to transaction settlement speed. Bank float levels will reduce correspondingly.” Rewane pointed out that some global issues would affect Nigeria, saying that, “African currencies including the naira will come under increasing pressure. The recession will reduce aid and Diaspora flows. If the CFA...
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...What Causes The Upheavals In Oil Prices In The World Robert Bourgot Florida Institute of Technology The Causes of Oil Price Upheavals in the World Introduction At this stage of civilization, oil has become an essential commodity for all countries of the world. The lack of it means that the pace of development of any country will be adversely affected (Carollo, 2011). The world has, in the recent times, experienced severe fluctuations in oil prices. As at the start of twenty first century, the oil prices have shown a significant increase, but the most significant rise in oil prices started around the year 2002. As mentioned earlier, these upheavals in oil prices have adverse effects to the economy of each nation. An increase in oil price causes increased production costs which consequently lead to cost push inflation. This leads to unemployment, decrease in supply, fall in the people’s purchasing power among many others (Brabec, 2012). In order to address these issues, it is imperative that the roots of these issues are identified. This is the central focus of this paper. It identifies and explains the possible causes of oil price upheavals in the world. According to Maher (2012), causes of fluctuating oil prices in the world can be explained under demand side, supply side, economic side, and environmental protection side. This section looks at the causes of oil price upheavals from the different points of views mentioned above. The demand...
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...http://www.iea.org/co2highlights/CO2highlights.pdf page 3 http://www.iea.org/papers/2009/Wind_Roadmap.pdf page 4 http://www.nytimes.com/2010/08/10/science/earth/10portugal.html?_r=1&hp=page Page 5 http://hubpages.com/hub/real-cost-of-fossil-fuels http://www.bp.com/genericarticle.do?categoryId=2012968&contentId=7065280- Page 2 http://www.nytimes.com/2010/09/16/world/europe/16hungary.html?_r=1&partner=rssnyt&emc=rss Page 6 http://articles.chicagotribune.com/2010-07-10/news/ct-met-coal-plant-online-sidebar-20100710_1_coal-plant-coal-fired-peabody-energy Page 7 http://www.chicagotribune.com/health/ct-met-dirty-power-plant-20100918,0,6593923.story As Europe Kicks Coal, Hungarian Town Suffers Miners in Hungary-what to do with cities,industries, states dependent on coal as Ohio,West Virginai, Utah,etc. As countries endeavor to reduce their fossil fuel emissions, many are trying to wean themselves from over-reliance on coal, the most highly emitting fuel. But coal is also the lifeblood of communities from Hungary and Germany to Kentucky and West Virginia, providing jobs, power and warmth. Figure 3: World wind resource map with installed capacity and production data for leading countries 3 180 0 6.9 19.3% 25 170 8 358 52.4 1.9% Denmark United States 12 210 6 300 8.8 n/a 3 241 836 7.1 1.3% China United Kingdom India 9 645 1 800 11.6 n/a Portugal 2 862 712 5.7 11.3% Cumulative installed GW in 2008 Additional...
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...TUTORIAL WORK ELECTRICITY SUBSIDY Members: * Roberto Garzón * Ludwin Gutiérrez * Karina Peña * Joseph Valarezo How as electricity subsidy affects families of Guayaquil? INTRODUCTION Ecuadorian economy has shown a sustained growth in recent years, allowing to the Ecuadorian government to invest in health, education, housing, and some projects for the strengthening of the country. However, it is necessary to control and reduce costs as subsidies. There are subsidies, which are targeted to certain groups of the population according to their characteristics. For example, the Solidarity bonus is a subsidy that is targeted to people in the poorest municipalities in the country and whose income is too low. By the other hand, there are also generalized subsidies, which do not make a proper distinction between groups with different characteristics in the population since they reach all citizens. For example, the electricity subsidy in Ecuador This research shows how people who live in the center of Guayaquil is affected by the reduction of the electricity subsidy since this tool has become in the last seventy years the most used in country due to its versatility, cost, availability, and ease of use. These characteristics make it essential in the human activities either in factories or in the houses since the electricity allows turning on appliances or machines for working or facilitating the lives of people. However, removal of fuel subsidy as gas (LPG) and gasoline...
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...passionate debate on the removal of fuel subsidy with which the country has been bedeviled in previous couple of months; the issue of whether the 2012 Appropriation Bill is a budget of fiscal consolidation or retrogression is as timely as it is topical. Transformation is a huge word that the Jonathan administration thoughtlessly uses to describe its aspirations. Is there anything transformational about the 2012 Budget proposals? In the course of presenting the Draft Budget, President Jonathan in paragraph 1 of 81 of his address states “this budget is a stepping stone to the transformation of our economy and country in our walk to economic freedom” and concludes in paragraph 76 thereof that “Mr. Senate President……the Proposal I lay before you this day seeks to sustain sound micro-economic growth that will translate to achieving socio-economic transformation, and gainful employment for our people”. Meanwhile, and perhaps by divine providence, in the afternoon of the same Tuesday, 13th of December; the News Agency of Nigeria (NAN) reported that Nigeria’s biggest power generating plant, Egbin thermal station, with an available capacity of some 1,080MW out of the nation’s meagre total of about 4000MW has been shut down on account of poor maintenance! Thus, whilst the President was preaching a sermon of transformation in the National Assembly, Nigerians were simultaneously experiencing practical retrogression. Worse still, the raging debate on the removal of fuel...
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...successful efforts in the past to produce biogas from cow dung slurry. Thousands of biogas plants have been installed in India and possibly abroad to say no to conventional energy resources. Afterwards there were experiments to mix cow slurry with food waste, paper waste and leaves poultry farm waste. We are going to use existing knowledge to make hostel messes energy efficient and moreover check the performance of the plant adding Algi from nearby marshy lands(easily located in village areas in India). This will help save lot LPG needed and also reduce environment hazards of land filling organic waste available in huge quantity in LPU. INTRODUCTION All over the world efforts are at their maximum level to decrease the dependency on conventional fuels giving way to green energy based upon renewable energy resources. Though LPG is used in all the hostels in Lovely Professional University (LPU) but we thought of utilizing the huge quantity of food waste coming out of hostel mess on daily basis. There are around more than 12,000 students staying in the hostels and every hostel have their own mess. Making biogas out of this would not make the messes energy efficient but also reduce the environment hazards as a result of decomposition of organic waste. Biogas production requires anaerobic digestion. Project aimed to create an Organic...
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