Impact of Insurance Sector Development on the Growth of the Nigerian Economy

Abstract

The removal of premium motor spirit subsidies represents a pivotal policy decision in many developing economies, including Nigeria. This paper examined the multifaceted implications of fuel subsidy removal on businesses of varying scales – large, medium, and small – and the subsequent impact on overall economic growth in Nigeria. The research sheds light on the intricate dynamics that unfold when fuel subsidies are eliminated. The study employed a qualitative approach to explore literature on the subject matter. Findings indicate that while the removal of fuel subsidies initially results in increased fuel prices, which impact transportation costs and the prices of goods and services, the implications on businesses vary significantly based on their size and sector. Large corporations, with greater capacity to absorb cost increases, often experience minimal disruptions and may even benefit from reduced competition. Medium-sized businesses face a more nuanced situation, as they navigate increased operational costs while striving to maintain market share. Small-scale enterprises are particularly vulnerable, as higher costs can lead to reduced profitability and potentially force some to cease operations. The study also identifies potential positive outcomes. The redirection of government resources from subsidies to critical sectors, such as infrastructure and education, can stimulate economic diversification and long-term growth. Moreover, the removal of subsidies can incentivize energy efficiency, innovation, and investment in alternative energy sources, fostering sustainable development. The paper contributed valuable insights into the implications of fuel subsidy removal on businesses of different scales and its wider impact on economic growth in Nigeria. The findings underscore the importance of targeted policies that cushion the immediate impact on vulnerable businesses, foster economic diversification, and promote sustainable growth. By understanding and addressing the diverse challenges and opportunities that arise from subsidy removal, policymakers can navigate this complex transition while fostering a more resilient and prosperous economy.

Keywords: Fuel Subsidy Removal, Businesses, Economy, Economic Diversification, Social Impacts