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The Implications of Fuel Subsidy to Nigerian Economy

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Extra Credit Assignment – The Implications of Fuel Subsidy to Nigerian Economy
Babandi Ibrahim Gumel
Doctor of Business Administration
California Southern University
Mike Ewald, PhD
November 2015

Introduction This paper would discuss the implications of fuel subsidy in the Nigerian economy. It is a position paper as an extra credit assignment for ECO 87501 for DBA course at California Southern University. The paper would review what subsidy is, the reason for subsidizing petroleum product in Nigeria, challenges the Nigerian economy is facing because of subsidizing petroleum products, and the crisis the country is facing because of subsidy.
Analysis
According to the dictionary of Investopedia, “subsidy is a benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is given to remove some burden and is often considered to be in the interest of the public. Politics plays an important part in subsidization. In general, the left is more for having subsidized industries, while the right feels that industry should stand on its own without public funds” (Investopedia, 2015, p. 1). The above definition clearly indicates that the subsidy is a kind of free money in whatever form given to the public by Government. It is worth noting that the definition highlighted that politics plays a role in subsidy, and politicians on the left, (e.g. in U. S. the Democrats) favor subsidy. The Merriam-webmaster dictionary defines subsidy as “money that is usually paid by a government to keep the price of a product or service low or to help a business or organization to continue to function” (Merriam-webmaster, 2015, p. 1). Nigeria is ranked as the world’s 14th largest producer of crude oil, and 10th largest proven reserve crude oil in the world (Sagagi, 2011). Transparency International ranked Nigeria 134 out of

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