Chapter One — 1.1 Background to the Study

Over the past decade, the relationship between subsidy removal and foreign reserves has become a subject of considerable debate among scholars and industry practitioners alike, particularly within the context of Lagos State where operating conditions differ markedly from more developed markets.

Lagos State presents a useful setting for examining this relationship precisely because the conditions there — structural, regulatory, and behavioural — differ from those typically assumed in the broader literature, most of which draws on evidence from more developed economies.

1.2 Statement of the Problem

While subsidy removal is widely discussed in policy and industry circles, empirical evidence on its actual effect on foreign reserves within Lagos State remains sparse and, in places, contradictory. This lack of localized, rigorous evidence makes it difficult for decision-makers to know with confidence whether current approaches to subsidy removal are helping or hindering foreign reserves — a gap this study sets out to close.

1.3 Objectives of the Study

1. To examine the effect of Subsidy Removal on foreign reserves in Lagos State.
2. To assess the extent to which subsidy removal influences foreign reserves within the study area.
3. To identify the challenges associated with subsidy removal in relation to foreign reserves.
4. To recommend strategies for optimizing subsidy removal in order to improve foreign reserves.

1.4 Research Questions

1. What is the effect of subsidy removal on foreign reserves in Lagos State?
2. To what extent does subsidy removal influence foreign reserves within the study area?
3. What challenges are associated with subsidy removal in relation to foreign reserves?
4. What strategies can be adopted to optimize subsidy removal in order to improve foreign reserves?

1.5 Significance of the Study

Beyond its academic contribution to the field of economics, this study has practical value for management teams within Lagos State seeking to understand how subsidy removal translates into measurable outcomes around foreign reserves. It is equally useful to students and future researchers looking for a localized empirical reference on this relationship.

1.6 Scope of the Study

The study is limited to an examination of Subsidy Removal and its relationship with foreign reserves within the context of Lagos State. It reflects a clearly defined scope of analysis and relies on data and perspectives available within that scope; generalizing the findings beyond this specific context should therefore be done with appropriate caution.