Fiscal trade-offs and public investment: Assessing the impact of oil subsidy removal on health, education and infrastructure
Keywords:
Infrastructures, Taxation and Subsidies, Energy Prices and Taxes, Government policy, Time-Series ModelsAbstract
The removal of oil subsidies in Nigeria is often justified on the grounds of improving fiscal space and enabling greater public investment in social infrastructure. However, the extent to which subsidy savings are effectively reallocated to priority sectors remains empirically uncertain. This study examines the fiscal trade-offs associated with oil subsidy removal, with particular emphasis on its impact on public sector investment in health, education, and infrastructural development over the period 2000–2024. Using annual time-series data sourced from the Central Bank of Nigeria, Budget Office reports, and sectoral expenditure records, the study employs the Autoregressive Distributed Lag (ARDL) modeling technique to analyze both the short-run and long-run relationships between subsidy removal and social infrastructure investment. The findings reveal that while subsidy reforms create some fiscal space for increased capital spending, the impact on social infrastructure investment is modest and uneven across sectors. In many cases, the anticipated gains are constrained by inflationary pressures, fiscal leakages, and weak institutional accountability. The study concludes that oil subsidy removal alone is insufficient to guarantee enhanced social investment without complementary governance reforms, and it recommends strengthened expenditure tracking and institutional safeguards to maximize the developmental benefits of subsidy reforms.Downloads
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