The Impact of Fuel Subsidy Removal on Household Welfare and Transportation Costs in Nigeria: A Cross-Sectional Analysis

The removal of fuel subsidies represents one of the most consequential yet contentious fiscal reforms in resource-dependent economies. This study examines the impact of fuel subsidy removal on household welfare and transportation costs in Nigeria, utilizing a cross-sectional regression framework with comprehensive control variables. Drawing on primary survey data collected from 1,200 households across six geopolitical zones following the May 2023 policy reform, the analysis reveals that fuel subsidy removal has exerted statistically significant negative effects on household welfare, primarily through the transmission mechanism of elevated transportation costs. The findings indicate that a one percent increase in fuel prices is associated with a 0.78 percent decline in household welfare indices and a 1.34 percent increase in transportation expenditures. These effects are disproportionately concentrated among low-income households, rural residents, and female-headed households. The study contributes to the literature by integrating demographic, macroeconomic, institutional, global, and infrastructural control variables within a unified analytical framework, offering nuanced insights into the heterogeneous impacts of energy subsidy reforms. The results underscore the critical importance of compensatory social protection mechanisms and targeted mitigation strategies to cushion vulnerable populations from the adverse welfare consequences of subsidy removal.