Does the removal of fuel subsidies influence the willingness to adopt renewable energy? Evidence from MSMEs in Nigeria

Fuel subsidies have been a central topic of discussion for decades in the Global South, including Nigeria, often implemented to enhance energy affordability for the population. However, on 29 May 2023, the President of Nigeria announced the elimination of the fuel subsidy, resulting in an increase in energy and electricity costs exceeding 300%. This resulted in widespread protests nationwide, significantly affecting all sectors, particularly enterprises. Thus, this study examines the impact of fuel subsidy removal on micro, small, and medium enterprises (MSMEs), as well as their level of awareness and correlation with willingness to transition to renewable energy technologies (RETs), utilizing original survey data from 1461 MSMEs across Nigeria. Results indicate that the removal of fuel subsidies impacted 90% of MSMEs surveyed. Regarding the willingness to transition to RETs, 77.2% of MSMEs expressed a positive inclination, whereas 11.7% were unwilling to undertake this transition. The willingness of MSMEs to transition is influenced by several factors, including state of residence, geographical area (settlement), level of education, enterprise category, the role of the respondents, energy type utilized by the enterprise, and the level of awareness of various RETs. The study’s findings enhance understanding of the factors influencing the adoption of RETs among MSMEs in Nigeria and the potential to inform strategies for sustainable energy development. Furthermore, the identification of specific factors influencing the transition decision provides valuable insights for targeted interventions and policymaking.