Madugu_economics

WHAT WE NEED TO KNOW ABOUT "THE REMOVAL FUEL SUBSIDY"

Fuel subsidies are a form of government intervention to reduce the cost of fuel by providing direct financial support to oil companies, and as such, subsidise the product to consumers (Nigerians). Nigeria is one of Africa’s largest producers of crude oil, and it relies heavily on this resource for its economic growth.

Government decided to remove that subsidies due to its insignificant impact on the economy to build other economic sector.

Removal of fuel subsidy in this country Nigeria results increase the level inflation, poverty, and reduction in purchasing power of the Consumer(citizens).
With the removal of fuel subsidy, analysts believe, Nigeria’s projected debt stock of $171 billion will be raised by a further 0.47 per cent. This development will also raise the sinking fund for refinancing and servicing of the debt stock from 29 per cent scheduled in 2023 appropriation act, to 43.8 per cent for the 2024 financial year.

Additionally, removing the subsidy could lead to social unrest and protests, as people may perceive the government as insensitive to their needs. There is also a risk that the removal of the subsidy could lead to a rise in fuel smuggling and other illegal activities.

We are not hoping that to happen, but possibly could happen if subsidies removed.

*Estimated fuel price after subsidy removal*

With a projected average cost of N600-700/litre once subsidy is removed, it implies that Nigerians would pay about N46.2billion daily for petrol, which translates to approximately N1.4trillion monthly and N8.4trillion in six months (July to December 2023).

Though the intention of this action has two impact on citizens, both positive and negative.

POSITIVE IMPACT ON FUEL SUBSIDIES REMOVAL
The primary advantages of removing the fuel subsidy, according to experts, is that it would free up resources for other sectors of the economy. The government currently spends a significant portion of its budget on fuel subsidies, which could be better spent on education, healthcare, infrastructure development, amongst other key sectors.

NEGATIVE IMPACT OF FUEL SUBSIDIES REMOVAL TO COMMON PEOPLE
Subsidy removal, without spending on the associated savings, would increase the national poverty level. This is due to the consequent rise in inputs’ costs which is higher than the rise in selling prices of most firms and farms.

The worsen part of this intentions there's no possibility of increase in Income of the consumer (citizens), and their spending would increase which resulting the the reduction in their Saving, purchasing power and welfare.

Finally, may we have the strength to endure this development process.

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Do you know about Sustainable Development Goals SDGs?

Sustainable Development Goals (SDGs) AKA the Global Goals, were adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet and ensure by 2030 all people enjoy peace and prosperity.

The 17 SDGs are integrated--they recognize that action in one area will affect outcomes in others, and that development must balance social, economic and environmental sustainability.

The SDGs are designed to end poverty, hunger, AIDs, and discrimination against women and girls.

The creativity, know-how, technology and financial resources form all of society is necessary to achieve the SDGs in every context.

1- No poverty
2- Zero hunger
3- Good health and well-being
4- Quality Education
5- Gender equality
6- Clean water and sanitation
7- Affordable and clean energy
8- Decent work and economic growth
9- Indus try, innovations and infrastructure
10- Reduced inequalities
11- Sustainable cities and communities
12- Responsible consumption and production
13- Climate action
14- Life below water
15- Life on land
16- Peace, justice and strong institutions
17- Partnership for the Goals.

How to Reduce unemployment in developing country like Nigeria?

Why we study Economics ?

Economist💚❤

✓✓ Definition of Type I Error

In statistics, type I error is defined as an error that occurs when the sample results cause the rejection of the null hypothesis, in spite of the fact that it is true. In simple terms, the error of agreeing to the alternative hypothesis, when the results can be ascribed to chance.

Also known as the alpha error, it leads the researcher to infer that there is a variation between two observances when they are identical. The likelihood of type I error, is equal to the level of significance, that the researcher sets for his test. Here the level of significance refers to the chances of making type I error.

E.g. Suppose on the basis of data, the research team of a firm concluded that more than 50% of the total customers like the new service started by the company, which is, in fact, less than 50%.

✓✓ Definition of Type II Error

When on the basis of data, the null hypothesis is accepted, when it is actually false, then this kind of error is known as Type II Error. It arises when the researcher fails to deny the false null hypothesis. It is denoted by Greek letter ‘beta (β)’ and often known as beta error.

Type II error is the failure of the researcher in agreeing to an alternative hypothesis, although it is true. It validates a proposition; that ought to be refused. The researcher concludes that the two observances are identical when in fact they are not.

The likelihood of making such error is analogous to the power of the test. Here, the power of test alludes to the probability of rejecting of the null hypothesis, which is false and needs to be rejected. As the sample size increases, the power of test also increases, that results in the reduction in risk of making type II error.

E.g. Suppose on the basis of sample results, the research team of an organisation claims that less than 50% of the total customers like the new service started by the company, which is, in fact, greater than 50%.

✓✓ Key Differences Between Type I and Type II Error

1. Type I error is an error that takes place when the outcome is a rejection of null hypothesis which is, in fact, true. Type II error occurs when the sample results in the acceptance of null hypothesis, which is actually false.

2. Type I error or otherwise known as false positives, in essence, the positive result is equivalent to the refusal of the null hypothesis. In contrast, Type II error is also known as false negatives, i.e. negative result, leads to the acceptance of the null hypothesis.

3. When the null hypothesis is true but mistakenly rejected, it is type I error. As against this, when the null hypothesis is false but erroneously accepted, it is type II error.

4. Type I error tends to assert something that is not really present, i.e. it is a false hit. On the contrary, type II error fails in identifying something, that is present, i.e. it is a miss.

5. The probability of committing type I error is the sample as the level of significance. Conversely, the likelihood of committing type II error is same as the power of the test.

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The multiplier effect

Every time there is an injection of new demand into the circular flow of income there is likely to be a multiplier effect. This is because an injection of extra income leads to more spending, which creates more income, and so on. The multiplier effect refers to the increase in final income arising from any new injection of spending.

The size of the multiplier depends upon household’s marginal decisions to spend, called the marginal propensity to consume (mpc), or to save, called the marginal propensity to save (mps). It is important to remember that when income is spent, this spending becomes someone else’s income, and so on.
Marginal propensities show the proportion of extra income allocated to particular activities, such as investment spending by firms, saving by households, and spending on imports from abroad.
For example, if 80% of all new income in a given period of time is spent on products, the marginal propensity to consume would be 80/100, which is 0.8.

Hence, if consumers spend 0.8 and save 0.2 of every $1 of extra income, the multiplier will be 5, which means that every $1 of new income generates $5 of extra income.

When people spend a high proportion of their incomes, they have a high marginal propensity to consume. This increases the multiplier effect.
By contrast, when consumers have a low marginal propensity to consume, it means they are more likely to save additional income rather than spend it. This reduces the multiplier effect.

How Does The Multiplier Effect Affect The Economy?

A low multiplier means that any government investment has little impact on the economy as the money is not circulating and stimulating activity. By contrast, a high multiplier means people are spending most of the money they receive, which stimulates other economic activities associated with what they are purchasing.