1. Covenant University, Ota
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

2. 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)

3. 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

4. Methodology
The model features
The dataset
Simulation strategies

5. Model Dynamic CGE model E2 (energy-environment) model
Follows features of standard PEP model
Incorporates carbon co-efficients

6. Dataset 2006 Nigerian SAM Re-aggregated to 8 sectors
Three factors of production (land, labour, capital)
One government
Two representative households
One firm

7. Simulation strategies
Partial removal (SIM 1)
Gradual removal (SIM 2)
Complete removal (SIM 3)
Nominal exchange rate as the numeraire

8. Results-Imports Price become expensive Imports fell-SIM 1
Imports rose-SIM 2&3

9. CONTD
Price become expensive
Imports fell-SIM 1
Imports rose-SIM 2&3

10. Exports SIM 1: food and agric. exports fell SIM 2&3: food and
agric. exports rose

11. CONTD SIM 1: food and agric. exports fell SIM 2&3: food and
agric. exports rose

12. Output SIM 1: agric. & food output shrinks SIM 2&3: output expands
More increase for SIM3

13. CONTD SIM 1: agric. & food output shrinks SIM 2&3: output expands
More increase for SIM3

14. Consumption SIM 1: rural consumption fell
SIM 2&3: rural consumption increased slightly
SIM 1&3: urban consumption rose
SIM 2: urban consumption declined

15. CONTD SIM 1: rural consumption fell urban consumption
increased, though
slightly

16. CONTD SIM 2: rural consumption rose slightly compared to
urban consumption

17. CONTD
SIM 3:
rural consumption rose,
similarly with SIM2 results

18. 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

19. 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

20. THANK YOU FOR LISTENING Questions and comments are welcomed