International Journal of Human Research and Social Science Studies

This study investigates the dual impact of Nigeria’s 2023 fuel subsidy removal on household welfare and inflation, with implications for green investment. Using monthly time-series data from 2019 to 2024 and a Vector Error Correction Model (VECM), the analysis tests two null hypotheses: that subsidy removal has no significant effect on (1) household welfare and (2) inflation. The results reject both hypotheses, revealing that subsidy removal acts as a strong costpush inflationary shock, which in turn drives a significant and persistent decline in household consumption expenditure (welfare proxy). Cointegration confirms a long-run equilibrium among subsidy policy, inflation, exchange rates, and welfare. The inflationary pass-through is amplified by exchange rate depreciation, while welfare losses are regressive, disproportionately affecting low-income households. The study concludes that without robust compensatory mechanisms, including targeted social transfers, inflation control policies, and transparent reinvestment of fiscal savings into green infrastructure, the short-term social costs of subsidy reform may undermine its long-term fiscal and sustainability objectives. Recommendations are anchored in an integrated policy framework that reconciles macroeconomic efficiency with household resilience. 

Fuel Subsidy Removal, Household Welfare, Inflation, Green Investment, Cost-Push Inflation, VECM, Nigeria JEL Classification: E31, H23, I31, O55, Q48

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