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Compensation Mechanisms for Fuel Subsidy Removal in Nigeria

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Compensation Mechanisms for Fuel Subsidy Removal in Nigeria

Since the end of 2015, the Buhari government has introduced major reforms to gasoline and kerosene subsidies, with a new “price modulation” policy that has seen upward adjustments in the price of both fuels—at the same time that major problems with supply continue, driving domestic prices above official levels in many areas.

This study conducts a detailed analysis of the compensation mechanisms that could be used to mitigate the impact of fuel subsidy removal on weak and vulnerable segments of Nigerian society. The study suggests actionable proposals that the government could pursue if it decides that it must mitigate the social impact of ongoing future price increases as well as pro-poor policies in which the government could invest as part of its general budgeting, given the fiscal space created by subsidy reforms.

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