Petroleum Product Pricing and Standard of Living in Nigeria: A Disaggregated Analysis

Ese James IGHOROJE; Julius TEMUHALE

Ese James IGHOROJE Southern Delta University, Ozoro
Julius TEMUHALE St. Mary’s University Institute, Tiko, Cameroon

Keywords: ARDL cointegration, petroleum pricing, standard of living, Nigeria, fuel substitution

Abstract

This study examines disaggregated petroleum product prices, Premium Motor Spirit (PMS), Automotive Gas Oil (AGO), and Dual Purpose Kerosene (DPK) on per capita income in Nigeria (1990–2024), controlling for GDP, inflation, and exchange rates. Data was sourced from Central Bank of Nigeria Statistical Bulletins, CBN Annual Reports, National Bureau of Statistics, and World Bank Development Indicators. ARDL bounds testing confirms cointegration (F-statistic = 5.35, p<0.01). Long-run elasticities show PMS negatively impacts living standards (-0.129, p=0.0387), AGO positively affects PCI (0.107, p=0.0015), and DPK shows positive substitution effects (0.126, p=0.0125). GDP enhances welfare (0.799, p<0.0001) while exchange rate depreciation severely erodes it (-1.092, p<0.0001). Inflation proves insignificant (p=0.5878). The error correction term (-0.604, p=0.0051) indicates 60% annual adjustment to equilibrium. Robust diagnostics (Breusch-Godfrey p=0.0634; Breusch-Pagan p=0.9057) validate the model. Policy should prioritize refinery rehabilitation for self-sufficiency, strengthen exchange rate management to mitigate import dependence, invest in public transport infrastructure to reduce PMS exposure, and accelerate LPG/grid expansion to capture DPK substitution benefits.