Effect of Fuel Subsidy Removal on Commodity Prices in Sokoto Metropolis, Sokoto State, Nigeria

Abstract

This study examines the impact of fuel subsidy removal, on commodity prices in Sokoto metropolis using a survey dataset for a sample of 339 respondents. In the model the dependent variable is commodity price while the independents variables are fuel subsidy removal, transportation costs and costs of electricity. In the estimation however, this study applied Ordinary Least Squares regression and the results indicate that fuel subsidy removal has a positive and statistically significant effect on commodity prices. This suggests that as the government has phased out fuel subsidies, the resulting increase in energy and transportation costs has been passed on to consumers through higher prices for a wide range of essential goods. Moreover, the study finds that transportation costs play a significant role in determining commodity prices. This highlights the significant pass-through of higher logistics expenses to consumers, underscoring the need to improve the efficiency and affordability of transportation infrastructure. Additionally, the analysis reveals that electricity costs also have a significant impact on commodity prices. As energy expenses rise, producers and distributors must incorporate these higher costs into the prices they charge. This points to the importance of addressing the drivers of increasing electricity prices, such as power generation, transmission, and distribution costs.