Analysis of the Effect of Fuel Subsidy Removal on Selected Food Prices in Port Harcourt, Rivers State Nigeria (2001-2012)

Abstract

This research was conducted to analyse the effect of fuel subsidy removal on selected food prices in Port Harcourt (2001-2012) the food items considered were rice, yam, garri, beef and fish. The study objectives were to examine the impact of subsidy removal on prices of rice, garri, yam, beef and fish, examine the price of different food items before and after subsidy and to examine if subsidy removal causes inflation.  Secondary data were used. Five simple regression equations were built with fuel subsidy as independent variables (X₁) while rice (Y₁), yam (Y₂) beef (Y₄), garri (Y₃) and fish (Y₅) were the dependent variable.  The study showed that from 1966 to 2012, Nigeria had removed subsidy 24 times in 58 years, and that the prices of most food items increased astronomically from 2001 to 2012 especially beef and fish due to fuel subsidy.  The coefficient of determination (R²) showed that there was a significant relationship between food prices and fuel subsidy.  The study concluded that removal of fuel subsidy has affected food prices. It was recommended that the policy of removal of subsidy   be implemented gradually to avoid further increase in price of food items.