A CRITICAL SURVEY ON THE IMPACT OF 2023 FUEL SUBSIDY REMOVAL ON THE LIVELIHOOD OF RURAL DWELLERS IN KOGI STATE

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Nigeria is well recognised as a prominent global producer of oil. The nation has a significant abundance of diverse mineral resources, most notable for its substantial deposits of natural gas and crude oil. According to Siddig, Aguiar, Grethe, Minor, and Walmmsley (2015), Nigeria has 28% of Africa's oil reserves, second only to Libya. In 2017, the nation's petroleum production reached a daily output of 2.5 million barrels, constituting around 24% of Africa's total petroleum production (Onwuemenyi, 2017). However, similar to most emerging countries, these riches have failed to translate into substantial improvements in the welfare conditions of the population. The deterioration in the distribution of refined petroleum products such as petrol and natural gas across the nation may be attributed to several factors, including corruption, smuggling activities, bureaucratic obstacles, mismanagement, and inefficiency (Chelminski, 2018). On the other hand, in the 1980s, Nigeria began the practice of subsidizing its petroleum sector subsequent to the establishment of the Nigerian National Petroleum Corporation (NNPC), a state-owned entity dedicated to the management of the country's petroleum resources. The observation was made that the ordinary Nigerian would have financial constraints in purchasing one litre of petrol without the presence of subsidies. Consequently, a subsidy programme was implemented with the aim of ensuring the affordability of gasoline prices for the whole population. Despite this, the price of petroleum continues to rise amidst a persistent shortage of gasoline, a situation that was intended to be alleviated with the deregulation of the downstream industry.

Additionally, Harring, Jönsson, Matti, Mundaca, and Jagers (2023) stated that it was expected that the elimination of the fuel subsidy programme would foster competition within the sector, leading to a decrease in prices, an increase in the availability of commodities, and improvements in efficiency and effectiveness. On January 1, 2012, the Nigerian federal government implemented a complete removal of gasoline subsidy as part of its efforts to deregulate the petroleum downstream industry. Similarly, in the same year 2012, the ex-president, Goodluck Jonathan, made the decision to abstain from making any subsidy payments. His rationale for this decision was rooted on the belief that the N3.4 billion allocated to subsidy expenditure was deemed unworthy due to allegations of mismanagement by corrupt government employees (Houeland, 2020). The gasoline subsidy emerged as a significant focal point for the Buhari government, although the Minister of Information, Alhaji Lai Muhammed, said that the nation is facing financial constraints and lacks the capacity to maintain the disbursement of fuel subsidy. Subsequently, there was an escalation in gasoline costs, with prices rising from N86 to N145 per litre, representing a surge of over 50%. In a formal declaration issued on May 13, 2016. Also, the ex -vice President Professor Osinbajo expressed his belief that the introduction of competition, increased private refinery operations, and the optimal functioning of NNPC refineries will lead to a significant reduction in pricing. Hence, the primary motive behind the elimination of this fuel subsidy was to facilitate the establishment of functional domestic oil refineries, so enabling local oil production and consequent decrease in domestic fuel costs, while simultaneously fostering a rise in the exports of refined oil.

Consequently, the discontinuation of subsidy payments was implemented as a measure to mitigate government expenditure in response to the decline in global oil prices. This decision aimed to address several issues, including the reduction of corruption within the oil sector, prevention of the diversion of subsidized oil by marketers to neighbouring nations, promotion of competition within the oil industry, and alleviation of the foreign exchange crisis encountered by marketers. The marketers of petroleum goods had difficulties in obtaining foreign currency, which presented a significant risk to the importation of these items and resulted in fuel shortages in Nigeria (Godwin, 2016). Therefore, the researcher assess the impact of 2023 fuel subsidy removal on the livelihood of rural dwellers in Kogi state.

1.2  Statement of the problem

The oil sector in Nigeria has had a significant impact on the country's economic policies and prosperity since attaining independence. The oil sector in Nigeria plays a crucial role in the country's economy, serving as a vital component rather than a mere dependency (Itumo & Onyejiuba, 2019). The primary source of Nigeria's economic strength is in the money generated from oil and gas, which constitutes over 90% of government income and about 40% of the nation's gross domestic product (GDP). Despite the notable accomplishments in the oil sector, the Nigerian government has consistently shown an inability to effectively harness the wealth generated from oil to significantly improve the well-being of its population in terms of poverty alleviation, the provision of essential social infrastructure, and meeting necessities (Raji, 2018).

A Umeji and Eleanya (2021), it has been observed that the nation is equipped with four refineries, each with the capability to produce around 445,000 barrels of petroleum per day. The current level of production capacity is sufficient to satisfy the demands of local consumers and also generate an excess that may be allocated for foreign sales, so making a positive contribution to the Gross local Product (GDP). Based on the provided information, it can be inferred that there exists a temptation to conclude that the nation has the capability to provide for the well-being of its populace. However, this assumption is not supported by the fact that the government continues to import a substantial quantity of petroleum, along with other related items, for domestic use. Corruption within the petroleum industry gives rise to a range of adverse outcomes, including misallocation of financial resources, diminished operational performance, and inefficiencies. As a result, the country's foreign financial market has experienced a period of economic downturn. The foreign exchange rate exhibits a persistent fall as the Nigerian currency, the naira, has a weakening trend against prominent global currencies. Simultaneously, the rates of unemployment and inflation are on the rise, leading to the closure of enterprises that are unable to navigate these obstacles. Despite the concerted efforts to enhance the nation's economic resilience by diversifying its export portfolio to include non-oil commodities, petroleum continues to provide over 95% of Nigeria's overall foreign revenue. Nigeria's increasing dependence on imported petroleum products might be attributed to the operational inefficiencies of its domestic refineries, which often fail to function optimally and fail to meet their production capacity. The importation cost of petroleum products has posed a danger to the country's capital expenditures and balance of payments in recent times (Gidigbi & Bello, 2020). The rural regions of Nigeria have long had challenges in terms of their quality of life, and the escalation in fuel costs has exacerbated this issue. The scarcity of food in urban areas may be attributed to the substantial transportation expenses incurred by rural residents, hindering their ability to convey agricultural goods to markets for sale. Consequently, perishable commodities such as tomatoes, mangoes, and oranges have the potential to deteriorate, resulting in an escalation in poverty rates among rural inhabitants. Numerous studies have been conducted to examine the consequences of gasoline subsidy elimination in Nigeria. However, there is a dearth of research on the specific effects of subsidy removal on the rural population, which has historically been marginalised by successive Nigerian governments across several administrative tiers. This is why the study is being carried out to find out the impact of 2023 fuel subsidy removal on the livelihood of rural dwellers in Kogi state.

1.3       Objectives of the study

The broad objective of the study is to examine the impact of 2023 fuel subsidy removal on the livelihood of rural dwellers in Kogi state. The specific objectives is as follows:

1.        Find out the extent fuel subsidy removal affected the socioeconomic activities of rural dwellers in Kogi state.

2.        Find out the extent fuel subsidy removal affected the income level of rural dwellers in Kogi state.

3.        Find out the extent fuel subsidy removal affected the standard of living of rural dwellers in Kogi state.

1.3  Research questions

The study will be guided by the following questions;

1.        What is the extent fuel subsidy removal affected the socioeconomic activities of rural dwellers in Kogi state?

2.        What is the extent fuel subsidy removal affected the income level of rural dwellers in Kogi state?

3.        What is the extent fuel subsidy removal affected the standard of living of rural dwellers in Kogi state?

1.5 Significance of the study

A critical survey on the impact of 2023 fuel subsidy removal on the livelihood of rural dwellers in Kogi state will be revealed to the Nigerian government and the citizens as there is a need for more awareness on the removal of fuel subsidy as there are lots of information which are not right, but because government do not carry the citizens along the impact seems to be hard on the populace.  Also, government needs to put up measures that will cushion the effect of fuel subsidy on rural dwellers.

Additionally, subsequent researchers will use it as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regard to a critical survey on the impact of 2023 fuel subsidy removal on the livelihood of rural dwellers in Kogi state.

1.6  Scope of the study

The scope of this study is boarded on a critical survey on the impact of 2023 fuel subsidy removal on the livelihood of rural dwellers in Kogi state. Theoretically, this study will discuss the reasons behind the 2023 removal of fuel subsidy in Nigeria, the impact of 2023 fuel subsidy removal on the livelihood of rural dwellers in Kogi state and  recommend strategies to cushion the impact of 2023 fuel subsidy removal on the livelihood of rural dwellers in Kogi state.

Geographically, the study will be delimited to secondary people resident  in Okene local government, Kogi state, Nigeria.

1.7 Limitation of the study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents.

In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed.

More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other schools, local governments, states, and other countries in the world.

1.8 Definition of terms

Fuel Subsidy: government effort in paying for the difference between the pump

Livelihood: a means of securing the necessities of life.

Rural dwellers: there are fewer people, and their homes and businesses are located far away from one another.