Fuel Subsidy Removal and the Rising Cost of Living in Nigeria:
Who Bears the Burden?
Rising fuel prices, persistent inflation, exchange rate instability, and increasing living costs have become major economic challenges in many developing countries, especially Nigeria. The removal of fuel subsidies, although intended to reduce government spending and improve economic efficiency, has also created serious concerns about household welfare, food security, purchasing power, and the overall standard of living, while wages and incomes struggle to keep pace with rising prices. This study critically reviewed existing literature on the relationship between fuel subsidy removal, inflation, exchange rate volatility, economic welfare, and cost of living. The study adopted a critical literature review methodology because it allows for a deeper understanding of existing evidence, policy debates, theoretical arguments, and inconsistencies across previous studies. The findings revealed that fuel subsidy removal contributes significantly to inflationary pressure by increasing transportation and production costs, which are then transferred to consumers through higher prices of goods and services. Exchange rate volatility was also found to worsen inflation by increasing the cost of imported goods, fuel, and production inputs. The review further showed that rising inflation weakens household purchasing power, increases food insecurity, reduces consumption expenditure, and lowers economic welfare, particularly among low-income households, rural communities, and vulnerable populations. This study concludes that fuel subsidy removal, inflation, and exchange rate instability are closely interconnected economic forces that collectively shape household welfare and living standards. Therefore, this study recommends that governments should combine subsidy reforms with targeted social protection programs, exchange rate stabilization policies, investment in local production and energy infrastructure, and transparent management of subsidy savings.
John, S. A., & Ishola, O. P. (2026). Fuel Subsidy Removal and the Rising Cost of Living in Nigeria: Who Bears the Burden? International Journal of Global Humanities and Management Insights (IJGHMI), 2(2), 1–15. https://doi.org/10.63665/ijghmi-y2f2a003
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