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Published:
Jun 28, 2026Updated:
2026-06-28Keywords:
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Main Article Content
Effect of Fuel Subsidy Removal on the monthly food price of selected commodities (white and yellow gari) in Nigeria
Abstract
This study assesses the effect of Nigeria’s 2023 petrol subsidy removal on the prices of white and yellow gari using monthly data (January 2018–December 2024). After Augmented Dickey– Fuller tests revealed variables integrated of mixed orders, the analysis employed ARDL bounds testing, error-correction modelling (ECM), and pairwise Granger causality. For white gari, the bounds test indicated cointegration (F=4.613 > I(0)=2.62 and I(1)=3.79, 5% level). Long-run estimates show headline inflation raises prices (β+0.1059, p<0.01) while petrol prices are negatively associated (β–0.2771, p<0.05), consistent with demand-compression and subsequent supply responses suggesting that the post-subsidy demand squeeze and seasonal supply rebounds ultimately dominated direct cost-push forces for this commodity. While for Yellow Gari, only the Exchange rate was positively significant in the long run. Short-run dynamics of White Gari indicated significant effects from contemporaneous PMS, lagged exchange rate, and lagged interest rate; the error-correction term (–0.1855, p=0.000) implied moderate monthly adjustment. Short-run dynamics show strong intrinsic momentum in yellow gari (D(LNGYP-1)≈0.379, p<0.01), a two-month negative fuel effect (D(LNPMS-2)<0, p<0.05), and interest-rate effects that flip sign across one and two months. Findings highlight roadhaulage costs as a key transmission channel from energy policy to staple-food prices, with short-run demand effects partially offsetting cost-push pressures. Therefore, it is recommended that the government prioritise cost relief in agricultural haulage through accelerated adoption of alternative transport fuels (e.g., Compressed Natural Gas for fleets), improved last-mile road maintenance on farm-to-market corridors, and streamlined checkpoints to reduce informal levies.
