Fuel Subsidy Reform and Environmental Quality in Nigeria

Abstract

The study examines the existence of a long run effect of fuel subsidy reforms on environmental quality in Nigeria for the period 1970 to 2012 using the Johansen and the Engle-Granger two step co-integration procedure techniques. Findings from the study supported evidence of a long run sustainable equilibrium model. The study developed a three case scenarios including i) a case of subsidy payment, ii) a case of effective subsidy and, iii) a case of no subsidy payment. Our estimation results showed that the first and the last case scenario do not significantly influence environment quality while an interaction of sound regulatory framework with subsidy payment (the case of effective subsidy) significantly exerts a responsive influence on environmental quality.

Keywords: Subsidy Reform, Environmental Quality, Climate Change, Johansen Cointegration

JEL Classification: H23, Q51, Q54