Fossil fuel subsidy reform for sustainable development in Nigeria: the role of renewable energy diffusion

Abstract

One of the indicators of the Sustainable Development Goal 12 (“Ensure sustainable consumption and production patterns”) is the phasing out of fossil fuel subsidies “in a manner that protects the poor and the affected communities” (UN, 2019). Fossil fuel subsidies exacerbate a wide range of adverse economic, environmental, and social conditions such as fiscal imbalances, petroleum product smuggling, greenhouse gas emissions, and social inequities. These subsidies also reduce resources that governments could invest to meet sustainable development goals and other development objectives. ☐ Attempts to reform fossil fuel subsidies are often faced with strong resistance for a variety of reasons, including the associated inflationary impacts and price shocks, poor energy security, lack of viable alternatives, and negative welfare impacts on some of society’s most vulnerable. The resistance to fossil fuel subsidy reform in Nigeria accounts for the persistent underinvestment in critical infrastructure and social development. ☐ This dissertation analyses the reasons for fossil fuel subsidy reform inertia in Nigeria by studying the history of subsidy reform, and the factors that influence it. It asserts that the diversification of the energy system to include sustainable technology options would reduce dependence on fossil fuel sources, increase energy security and potentially reduce the political barriers to fossil fuel subsidy reform. To validate this assertion, a scenario analysis of renewable energy penetration was done based on Nigeria’s sustainable energy for all action agenda (SE4ALL-AA). The study utilized the Long-range Energy Alternative Planning (LEAP) tool to project the sustainable development benefits of clean energy diffusion. The study examined the opportunities and challenges of renewable energy development and reviewed case studies to derive policy recommendations.