IMPACT OF FUEL SCARCITY ON NIGERIA’S ECONOMY

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Until the early 70’s, the mainstay of Nigeria economy was agriculture. Then the country was famed for her proficiency in the production of groundnuts hence the Kano groundnut pyramids, oil palm and the faster part of cocoa in the western part of the country.The discovery of oil in the country in commercial quantities brought about radical changes in the economy of the nation. All other sectors seemed to have gone into oblivion and indeed were abandoned thereby making the country to be totally dependent on oil for her foreign exchange earnings; not agriculture any more. All effort made since then to diversify the economy of the country have come to naught (Ovaga, 2012). As expected, the narrowing of the economy to a monolithic export commodity has its attendant drawback as oil by virtue of its importance to the economics of nations has inevitably become a subject of political manipulation. But the greater danger for Nigeria is that as a sole commodity of the nation and the inherent total dependency on oil has made the country’s economy revolve around it. Virtually all essential service rendered in the country revolves it. Almost all other sectors of the economy depend on oil.Any contemplation therefore of a possible scarcity or unavailability of the product will no doubt spell doom for the economy of the country (Sikkam, 2009).

Just like water and air are important to the living human being for daily duties and hitch-free survival, the importance of fuel to automobile cannot be over looked. A typical situation is in the case halts because of the fact that there is shortage of fuel. The importance of fuel in this our developing and technically inclined economy is fast like the mixture of oil and salt as far as the economy forgets growth as one of its goals. Fuel is used in a variety of activities ranging from production, mobility, cooking, electricity supply, sources of foreign exchange, to mention but a few. To this extent one would accept that fuel plays a great role in the life of every citizen of the country and the country as a whole.

Yemi (2012) opined that fuel scarcity has plagued the nation recently appeared to be worse at the beginning of these years it caused a lot pain anguish and dislocation of economic and sundry activities. There was hardly any individual industries institutions and organization in Nigeria today that was not severely affected. It is widely believed in government circles what perennial fuel crisis is largely caused bottlenecks in the distribution system. But a survey show that the bottlenecks and other associated problem are caused by conflicting activities of multifarious government agencies.

Besides there are problem of manpower shortage inadequate funding lack of materials legal limitation and safely of which increase the crisis in Nigeria despite the effort of DPR some encourage and sell adulterated fuel (Nwankwor,1981). The crisis situation worsening day after day when some fuel stations sold fuel in the night to the a black markets in which they will increase the rate from N350 to N500 per gallon depending on the level on the level of adulteration with kerosene. The fuel scarcity was believed to be worse in certain occasions by hoarding fuel diversion smuggling and under deliver at retails outlets have been rampant with the overall co-operation monitoring and general supervision of product random sampling at several filling stations and observed that the perennial fuel shortage was caused by filling stations. Despite all the efforts of the ministry and parastatals the NNPC has almost found it impossible to eliminate the activities of saboteurs in the oil industry in the country. Investigation has shown that between January and March 1999 Nigeria has had a daily local consumption of 8.509 million liters of fuel supported with 6.883 million liters imported fuel thereby bringing the product available to 15.392 million litters. Allwell (2012) suggests that smugglers and saboteurs in the country contributed so much to the scarcity.

1.2 STATEMENT OF THE PROBLEM

Despite the NNPC official attempt to arrest the lingering fuel crisis culminating in the first even “operation crush” nationwide exercise the problem has refuse to go.The station is blamed on the activities of economic saboteurs who divert greatest percent of the fuel supply meant for daily consumption to the black market. Nwosu(2009)said that as long as poor pricing of petroleum product the high pricing in neighboring countries continued the smuggling of oil outside the country would remain a lucrative business. Arinze (2011) opined that the fuel shortage is a reflection of bad management. Irrespective of the negative effects of fuel price increase, the Federal Government of Nigeria on January 1st,2012ceased to subsidize petroleum In Nigeria, for decades Nigerians have enjoyed low gasoline prices, Now that this benefit has ended, what are the economical implication other that the popular planed protest by various groups such as labour, occupy Nigeria and fuel subsidy, on the nation. The economical effects, without auguring for or against subsidy removal, are what this paper will try to capture. The Government of Nigeria would have to consider these effects now or deal with it In the near future.

Such effects include hikes in transportation fares, journey that normally costs ten Naira (N50) a drop now costs twenty Naira (N100) to one hundred and fifty Naira (150) a drop, which represents a total increase of 200 percent. Conversely the daily spending of the average citizen has increased due to the sky rocketed increases in foodstuff, which was occasioned by the fuel scarcity (Ovaga, 2012).

Furthermore, lateness to duty or offices has been heightened as a result of lack of commuter buses and taxis to take them to their various destinations.

1.3 OBJECTIVES OF THE STUDY

The main aim of this study is to examine impact of fuel scarcity on Nigeria’s economy. Specifically, this study seeks to:

i.          Determine whether hoarding and smuggling if stopped or curtailed especially in Enugu, can prevent fuel scarcity equally.

ii.        Determine whether presidential involvement can help to stop fuel scarcity in Enugu State.

iii.      Determine whether none payment of salaries to the distributors of fuel can lead to fuel scarcity.

iv.      Find out whether government’s reduction of fuel prices, will affect fuel scarcity.

1.4 RESEARCH QUESTIONS

The following research questions will be answered in this study:

i.          Can hoarding and smuggling if stopped or curtailed especially in Enugu, prevent fuel scarcity equally?

ii.        Can presidential involvement help to stop fuel scarcity in Enugu State?

iii.      Can none payment of salaries to the distributors of fuel lead to fuel scarcity?

iv.      Does government’s reduction of fuel prices, affect fuel scarcity?

1.5 SIGNIFICANCE OF THE STUDY

This study will be of great benefit to the Nigeria National Petroleum Company (NNPC) who is not the sole cause of fuel scarcity. This study will help them to find out those people or those things that contribute to fuel scarcity and take drastic measure to combat them.

This study or research will be of immense benefit to the government because if there is fuel scarcity, it then means that crude oil is also insufficient by this; the government will not have enough oil to transport in order to get foreign exchange.

This study will also be of great benefit to car owners and businesses because if the fuel scarcity is rectified and resolved all business will start improving and progressing.

From this study, the rural drivers will find it easy to transport their farm product from the rural area to urban zones because the cost fuel will be on a lower side.

Also from those research work, it will be kind of encouragement. In that when the cost fuel is low, the cost of transportation will be also low, and these can lead also to low price of commodity been transported.

1.6 SCOPE OF THE STUDY

This study focuses on the impact of fuel scarcity on Nigeria’s economy. Specifically, this study focuses on determining whether hoarding and smuggling if stopped or curtailed especially in Enugu, can prevent fuel scarcity equally, determining whether presidential involvement can help to stop fuel scarcity in Enugu State, determining whether none payment of salaries to the distributors of fuel can lead to fuel scarcity and finding out whether government’s reduction of fuel prices, will affect fuel scarcity.

Selected residents in Enugu metropolis will serve as respondents for the survey of this study.

1.7 LIMITATIONS OF THE STUDY

The research work is limited to fuel scarcity in Nigeria with a case study of Enugu metropolis. This study was carried out purely as an academic exercise and therefore could neither receive any financial support form the government or any private enterprise. The limited financial resources of the researcher is thus a major handicap and thereby resulted in limiting the study only to Enugu metropolis. Time factor also proved a major constraint.

1.8 DEFINITION OF TERMS

Fuel Scarcity: This refers to the fact that sources of fuel in an economy are not endless.