EFFECT OF FUEL PRICE HIKE ON HOUSEHOLD PRICES IN NIGERIA
Background of the Study
Agriculture was the primary industry in Nigeria right up to the beginning of the 1970s. At that time, the nation was well-known for its expertise in the production of groundnuts, which led to the construction of the groundnut pyramids in Kano, as well as oil palms and quicker parts of cocoa in the western portion of the nation. The country's economy saw profound shifts as a direct result of the finding of oil in the country in amounts sufficient for commercial production. Agriculture is no longer the primary source of the nation's income in terms of foreign currency since all other industries seem to have disappeared into oblivion and were, in fact, given up on, which has made the nation wholly reliant on oil revenues. Since that time, several attempts have been made to diversify the country's economy, but none of them have been successful. Because of the vital role that oil plays in the economies of countries, it has unavoidably become a target of political manipulation. This is an unavoidable consequence of the concentration of the economy on a single export commodity. The fact that oil is Nigeria's only exportable product, coupled with the country's inherent and complete reliance on the commodity, poses a larger threat to the economy of the country than any other factor. It is the center around which almost every critical service that is provided in the nation revolves. Oil is essential to almost every other part of the economic system. Any thought given to the possibility of a shortage of the commodity or its complete unavailability would, as a result, unquestionably bring about the collapse of the national economy (Sikkam, 2022).
According to Yemi (2022), a complete scarcity has lately afflicted the country, and it looked to be worse at the beginning of these years. This caused a great deal of suffering, agony, and disruption of many economic and noneconomic activities. It was difficult to find a single industry, institution, or organization in Nigeria that had not been negatively impacted by the situation today. It is a commonly held belief in official circles that the persistent fuel crisis is a primary factor in the bottlenecks that have developed in the distribution system. According to the results of a poll, however, bottlenecks and other related problems are generated by operations that are in conflict with one another that are carried out by several government entities. In recent years, Nigeria has been used to seeing an increase in the cost of petroleum. The most recent of the price increases was the shocker in, 2020, when the pump price was increased to N180-N185 per litre from N98, representing a 175.92 percent increase; however, the price was later reduced to N165 as a result of the protest that was carried out by the Nigeria Labor Congress (NLC), Trade Union Congress (TUC), and other organized labor bodies in Nigeria. Because of this rise, the annual percentage rate of inflation jumped from 15.92 percent in November 2022 to 22.09 percent in December 2022. Because of the recent price hike, which sparked a six-day protest, the nation's economic activity came to a halt, and Nigeria is believed to have suffered a loss of around USD1.3 billion, which is equivalent to N207.1 billion (NBS 2021; Aye et al 2019). According to the findings of the National Bureau of Statistics (NBS), the wholesale and retail sector suffered the greatest amount of damage, accounting for 42 percent of the total economic loss and costing a total of N86.984 billion. This was followed by the oil and gas sector, which is the most important source of revenue for the government, accounting for 14 percent of the total economic loss and costing N28.710 billion. It is anticipated that the agriculture industry lost a total of N17.87 billion (NBS 2021). Agriculture is responsible for around 45 percent of Nigeria's gross domestic product (according to the NBS site as of March 2012), and it employs approximately 95 percent of the rural population. Despite the country's tremendous economic development, there is still a substantial amount of poverty in Nigeria. In fact, Nigeria has one of the fastest economic growth rates in the world (averaging 7.4 percent over the last decade). Despite the fact that the economy of Nigeria has been rising, as seen by the rise of the GDP, this expansion has not translated into a real improvement in the quality of life of the typical Nigerian. An rise in pump price, particularly that of gasoline, will have an exponential influence on the cost of transportation, the cost of implements to use on farms, and a greater cost of living, all of which their streams of revenue are unable to sufficiently provide for on their own. Therefore, the study will examine effect of fuel price hike on household prices in Nigeria
Statement of the Problem
Since 1970, the price of a barrel of oil produced domestically in Nigeria has been steadily increasing, making the country one of the few in which this trend can be seen. The economy has been negatively impacted in a variety of ways as a direct result of the persistent rise in the price of crude oil. Whatever occurs in the oil sector of the economy has an effect on all other parts of the economy, and as a corollary, it has an impact on the overall economic policies of the nation. People who live in rural areas are more likely to be affected by this phenomenon due to a lack of adequate infrastructure, a low level of access to productive assets, and, most importantly, inadequate access to formal education. As a result, their only source of income is the income they generate from the products they grow, as they typically do not have access to jobs that pay a good wage. According to Adeyeye and Dittoh (2020), any country that neglects the development and empowerment of the rural communities can not expect genuine development to occur in that nation. To put it another way, unless a nation's rural parts are adequately developed, there is very little chance that the country will see any significant development (World Bank 2022). It is now widely believed that rising gasoline costs are causing shifts in the financial and consumption habits of households. It would seem that the primary behavioral reactions would be decreased use of gasoline as well as a reduction in the number of automobile trips taken, together with a drop in expenditure on activities such as "going out" and entertainment. Concern on the part of the public, policymakers, and politicians reflects further anxieties about the implications of indirect inflationary impacts that rising fuel costs will have on households. This is because the increased costs of production and transportation will eventually be passed on to consumers in the form of higher prices for goods and services. Following on from what has been said before, this study therefore, examines the effect of fuel price hike on Household prices in Nigeria.
Objective of the Study
The broad objective of the study is to examine the effect of fuel price hike on Household prices in Nigeria. The specific objectives is as follows:
To determine whether there is a significant relationship between fuel price hike and increased household products prices.
To ascertain the extent fuel price hike affects the affordability of household products in Nigeria.
To examine the effects of fuel price hike on purchasing power of households in Nigeria.
The following questions have been prepared for the study:
Is there a significant relationship between fuel price hike and increased household products prices?
To what extent does fuel price hike affect the affordability of household products in Nigeria
What is the effect of fuel price hike on purchasing power of households in Nigeria?
Significance of the Study
The study is significant to government and policy makers as they will be privy to the harsh condition the recent fuel hike has caused Nigerian households as prices of commodities have soar higher than it use to be and will find ways of ameliorating the sufferings of the people as a result of the fuel hike. The study will be significant to the academic community as it will contribute to the existing literature.
Scope of the Study
The scope of this study borders on the effect of fuel price hike on Household prices in Nigeria. The study will further determine whether there is a significant relationship between fuel price hike and increased household products prices, ascertain the extent fuel price hike affects the affordability of household products in Nigeria, and examine the effects of fuel price hike on purchasing power of households in Nigeria.
Limitation of the Study
Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. Insufficient funds tend to impede the efficiency of the researcher in sourcing for the relevant materials, literature, or information and in the process of data collection (internet, questionnaire, and interview), which is why the researcher resorted to a moderate choice of sample size. More so, the researcher will simultaneously engage in this study with other academic work. As a result, the amount of time spent on research will be reduced.
Definition of Terms
Fuel: material such as coal, gas, or oil that is burned to produce heat or power.
Price hike: a sudden or large increase in prices , rates , taxes , or quantities
Household: a house and its occupants regarded as a unit.