FUEL SUBSIDY REFORM AND PRICE TRANSMISSION IN INFORMAL URBAN FOOD SYSTEMS: EVIDENCE FROM BENIN METROPOLIS, NIGERIA

Abstract

This study examined the effects of the removal of fuel subsidies in May 2023 ontransportation costs, commodity prices, and traders’ livelihoods in urban informal markets in BeninMetropolis, Nigeria. Data were collected from 364 traders in the Oba and Uselu markets andanalysed using descriptive statistics, Pearson correlation, paired-sample t-tests, and simple linearregression. The results revealed a substantial increase in transportation costs following subsidyremoval, while traders’ average monthly profit declined by ₦40,491. However, regression analysisshowed that increases in transportation costs did not significantly predict changes in commodityprices, indicating weak or incomplete price pass-through within the market system. Despite thelimited transmission of commodity prices to the broader economy, traders experienced a notabledecline in profit levels, suggesting that part of the cost shock was absorbed internally rather thanpassed on to consumers. Correlation analysis further revealed a moderate positive relationshipbetween household income and subsidy-related economic pressure, highlighting greatervulnerability among lower-income traders. By integrating Price Pass-Through Theory with theSustainable Livelihoods Framework, the study demonstrates that informal urban markets serve ascritical arenas in which macroeconomic policy shocks are mediated through traders