www.covenantuniversity.edu.ng
Raising a new Generation of Leaders
Agricultural Sector Performance and Nigeria’s
Fuel Subsidy Removal: A CGE Simulation
Akinyemi, O., Alege, P. O., Ajayi, O. O., Adediran, O. S. and Urhie, E.
Covenant University, Ota
Presented at the 11th African Economic Conference (AEC) under the theme
“Feeding Africa: Towards Agro-Allied Industrialization for Inclusive Growth”
to hold from 5th to 7th December 2016
Introduction
• The Agricultural sector
-contributes to growth and development
-single largest employer of labour
-source of income for many rural dwellers
-instrumental to overcoming hunger (UN-SDG 2)
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Objective
• Investigate the response of the agricultural
sector to fuel subsidy removal in Nigeria, using
a dynamic simulation approach (CGE)
-Given that certain policies might influence different sectors of the
economy, including the agricultural sector
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Methodology
• The model features
• The dataset
• Simulation strategies
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Model
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Dynamic CGE model
E2 (energy-environment) model
Follows features of standard PEP model
Incorporates carbon co-efficients
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Dataset
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2006 Nigerian SAM
Re-aggregated to 8 sectors
Three factors of production (land, labour, capital)
One government
Two representative households
One firm
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Simulation strategies
• Partial removal (SIM 1)
• Gradual removal (SIM 2)
• Complete removal (SIM 3)
• Nominal exchange rate as the numeraire
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Results-Imports
• Price become expensive
• Imports fell-SIM 1
• Imports rose-SIM 2&3
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CONTD
• Price become expensive
• Imports fell-SIM 1
• Imports rose-SIM 2&3
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Exports
• SIM 1: food and
agric. exports fell
• SIM 2&3: food and
agric. exports rose
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CONTD
• SIM 1: food and
agric. exports fell
• SIM 2&3: food and
agric. exports rose
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Output
• SIM 1: agric. & food
output shrinks
• SIM 2&3: output expands
• More increase for SIM3
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CONTD
• SIM 1: agric. & food
output shrinks
• SIM 2&3: output expands
• More increase for SIM3
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Consumption
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SIM 1: rural consumption fell
SIM 2&3: rural consumption increased slightly
SIM 1&3: urban consumption rose
SIM 2: urban consumption declined
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CONTD
• SIM 1:
• rural consumption fell
• urban consumption
increased, though
slightly
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CONTD
• SIM 2:
• rural consumption rose
slightly compared to
urban consumption
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CONTD
• SIM 3:
• rural consumption rose,
similarly with SIM2 results
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Conclusion
• The removal impacts the sector differently
under varying simulations
• Overall, the sector has a better performance
under a complete removal
• Increased policy attention for the rural
consumers
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Policy Recommendations
• Implementation of policies in other sectors of
the economy-with caution
• Support of complementary policies to drive
growth
• Infrastructural and technological dev. in the
long term will support growth & food security
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• THANK YOU FOR LISTENING
• Questions and comments are
welcomed
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