Department of Economics, Umaru Musa Yar’adua University, Katsina state, Nigeria (Currently a PhD candidate at the Department of Economics, International Islamic University, Malaysia)
Online published on 21 November, 2013.
Despite the tremendous contributions of petroleum products to the Nigerian economy, having appropriate pricing policy has been a contentious issue and remains one of the most complex socio-economic policy issue in Nigeria. This motivated this study, which estimates the demand elasticities of the two subsidised petroleum products in Nigeria (gasoline and household kerosene) between 1980 and 2010 and analyse their implications for the petroleum products subsidy in Nigeria. Lagged endogenous dynamic modelling approach to regression analysis is used due to the derived nature of energy demand. The findings revealed that the demand for gasoline is price and income inelastic in both the short-run and the long-run, and income is most important determinant of gasoline demand. On the other hand the demand for kerosene is income elastic in the long-run but have negative income elasticity coefficient. Overall the demand for both gasoline and kerosene are more responsive to changes in income than prices. The results implied that deregulating gasoline price may have positive socio-economic and environmental implications, whereas deregulating kerosene price may have negative socio-economic and environmental implications.
Gasoline, Kerosene, Demand elasticity, Subsidy, Dynamic model
