Deterministic Model and Analysis of Fuel Subsidy in Nigeria Commodity Market Dynamics

Abstract

The anxieties among the Nigerian populace over the removal of fuel subsidy have brought economic tension in the country. The Federal Government has hinged the decision on the excessive revenue leakages due to the huge subsidy, and the need to re-channel the subsidy fund to more developmental projects which will impact the Nigerian economy growth. Trade union and civil society organizations hinge their opposition to the removal of fuel subsidies based on its overbearing effect on the livelihood of citizens in terms of the subsidy-induced high cost of living and cost of production. In light of this pandemonium, there is a need to study Nigeria's fuel subsidy, the consumers’ purchasing power, and the commodity market dynamics using mathematical modeling and analysis. In this paper, a deterministic model is proposed to study the dynamics of fuel subsidy, consumer purchasing power, the oil-pirating groups, and the commodity markets. In order to gain insight into oil-leakages impact on the government oil revenue, time delay is used to depict the oil-theft control by the Nigerian government. The findings of this work highlight veritable conditions for acceptable implementation of subsidy regime that will improve consumers’ income and the blockage of oil thefts.

Keywords: Government Crude-Oil Revenue: Consumers Purchasing Power: Commodity Markets: Deterministic Model: Time Delay