AN ECONOMIC IMPACT ANALYSIS OF THE FIVE PERCENT SURCHARGE ON REFINED PETROLEUM PRODUCTS IN NIGERIA

Abstract

This study examined the economic impact of the 5% surcharge on refined petroleum products in Nigeria, with a focus on its implications for fiscal sustainability and household welfare. A quantitative research design was adopted, employing a descriptive survey approach. The study population comprised households across five major urban centers—Lagos, Abuja, Port Harcourt, Kano, and Kaduna. Using a stratified random sampling technique, 500 households were selected, and 450 valid responses were obtained, representing a 90% response rate. Data were collected through a structured questionnaire measuring household welfare, consumption patterns, cost of living, and perceptions of fiscal contribution. Descriptive statistics and multiple regression analysis were employed to analyze the data at a 5% significance level (α = 0.05). The findings revealed that the 5% surcharge has a moderate but significant effect on household welfare, leading households to adjust consumption patterns and prioritize essential expenditures. The surcharge also contributes to a higher cost of living and is perceived to moderately enhance government revenue. Hypothesis testing confirmed significant relationships between the surcharge and household welfare (β = 0.412, p < 0.05), consumption patterns (β = 0.365, p < 0.05), cost of living (β = 0.428, p < 0.05), and fiscal perception (β = 0.298, p < 0.05). These results underscore the dual impact of fuel surcharges on microeconomic household behavior and macroeconomic fiscal outcomes. The study concludes that while the surcharge supports fiscal sustainability, it imposes moderate financial strain on households, particularly in urban centers. The study recommends targeted subsidies, public awareness campaigns, complementary fiscal policies, continuous monitoring, and revenue diversification to mitigate adverse household effects while sustaining government revenue.