EFFECTS OF FUEL SUBSIDY REMOVAL ON STANDARD OF LIVING IN NIGERIA
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EFFECTS OF FUEL SUBSIDY REMOVAL ON STANDARD OF LIVING IN NIGERIA
ABSTRACT
This study investigates the consequences of fuel subsidy removal on Nigerians’ standard of living in Lagos State, with 50 civil servants randomly picked from Ikeja for the purpose of the study. Statistical data for around eight separate times of fuel hikes in Nigeria was released, and the tool used to collect the data was a questionnaire with sixteen items.
Chi-square was used to analyse the collected data. So, this study concluded that the increase in fuel pump prices caused by the removal of fuel subsidies has a negative impact on people’s standard of living,
because fuel is required for the transportation of major commodities such as agricultural produce and other market products in Nigeria.
Chapter one
INTRODUCTION
1.1 Background of the Study
The impact of fuel subsidy reduction on Nigerians’ level of living have piqued the curiosity of both the economy and citizens. This research information will reveal how the elimination of fuel subsidies affects Nigerians’ standard of living.
Petroleum is the foundation of the Nigerian economy. It has a significant impact on the country’s economic, political, and social future.
The discovery of commercial quantities of oil in Olobiri in the Niger Delta, followed by Afam and Boma in the 1960s, established Nigeria as an oil-producing nation. The oil sector emerged as the primary economic driver in the 1970s as a result of huge increases in oil processing and the nation’s proven oil reserves and production.
A subsidy is defined as a direct government transfer to an individual or private commercial enterprise that is judged advantageous to the public. (Ogundipe, D.O. 2013).
According to Ogundipe D.O. 2013, a fuel subsidy is a financial aid offered by the government to autonomous and foremost oil marketers in order for them to supply their products at a lower cost for the benefit of the populace.
This step is nearly always intended to increase a country’s economy, provide social amenities for its citizens, stabilise the market, create job opportunities, and, of course, the Nigerian government’s new notion that it is capable of combating corruption.
The issue of subsidy is not new to the nation’s downstream because it existed during the military dictatorship when the nation’s four refineries could only produce so little that they couldn’t even meet the people’s domestic demands.
Then there was a need to import finished petroleum products such as diesel, petrol and kerosene to suit Nigerians’ home needs. As a result, influential Nigerians and those in positions of authority saw the instant wealth that would emerge from this opportunity and began acquiring various wells throughout the country,
eventually taking over the petroleum businesses. This clearly marked the birth of the child of fuel difficulties that Nigerians are currently dealing with, particularly those involving petroleum.
On January 1, 2012, Nigerians awoke to one of the greatest shocks of their lives when the federal government announced the removal of fuel subsidies at a time perceived to be wrong, in a way many saw as erroneous, in a situation several believed was unstable, and with arguments many opined came with a sinister motive.
This increased the price of one litre of petrol from N65 to N141. A trip down memory lane revealed that the then-Federal Government of Nigeria removed kerosene and diesel subsidies for reasons similar to those given by President Jona’s administration, with promises that such policy would have long-term positive effects on all areas of the country.
However, nothing substantial could be described as the policy’s celebrated outcome. The then-federal government argued that eliminating subsidies on diesel and kerosene would make the products more available and affordable, but this proved to be a fallacy; instead of the promise of availability, the products became more scarce and expensive.
Unfortunately, none of the wrecked refineries were able to reopen as a result of the money generated by the removal of diesel and kerosene subsidies. When the Petroleum Products Pricing and Regulatory Agency (PPRA) announced the controversial policy on January 1, 2012, one has to question if the time-honored proverb ‘once bitten, twice shy’ was not in the thoughts of long-suffering Nigerians.
Following weeklong protests by Nigerians led by the Nigerian Labour Congress (NLC), Trade Union Congress (TUC), and some civil society groups, the government bowed to public pressure not to completely remove the fuel subsidy due to the negative effects it would have on the populace, particularly where there was no palliative, and the fact that the government caught the people off guard.
After much deliberation, the government reversed course, partially eliminating the subsidy and lowering the price of petrol from N141 to N97 per litre.
Although it was not the return to the status quo that Nigerians desired, they placed a lot of optimism in the government’s planned palliatives to mitigate the negative impacts of the partial withdrawal of fuel subsidies on the masses.
Unfortunately, the majority of the promised relief measures, such as substantial job creation, easy transportation, and other benefits, did not come to fruition.
In early 2014, the same government was hawking the concept of eliminating what remained of the subsidy, which the people believed was the only advantage they received from the nation’s naturally endowed petrol-dollar bounty.
The government contended that a small group of Nigerians known as the cabal is earning handsomely from the subsidies, and that the current low price of oil will always encourage smuggling across our multiple porous borders.
The government also stated that removing all fuel subsidies will attract greater investment in the downstream oil sector, hence increasing jobs and economic growth.
Although the government’s reasons may appear compelling, Nigerians have a tragic story and numerous frustrations to share after many years of fuel price increases based on horrible regimes and the government’s failure to deliver on its promises.
1.2 Statement of Problem
The government’s fuel subsidy reduction strategy was intended to have a positive impact on the economy through the subsidy reinvestment programme (SURE – P) and to reduce oil-related corruption, consequently raising Nigerians’ standard of life.
However, the withdrawal of fuel subsidies would have the following negative consequences for Nigerians:
i. A lack of suitable palliatives, such as substantial job growth, convenient transportation, and a consistent supply of electricity, to mitigate the bad impacts.
ii. Increased production costs as a result of higher fuel prices.
iv. Increased expense of supplying services
iv. Increased house rent (cost of living).
v. Increase in transportation costs.
vi. Reduction in the standard of living
vii. Rise in the cost of goods and services
viii. Increased corruption.
ix. Increase in education costs.
1.3 The purpose of the study
The purpose of this study is to examine the impact of fuel subsidy reduction on Nigerians’ living standards. The study’s purpose can be summarised as follows:
1. To determine whether the elimination of fuel subsidies has any impact on the private cost of schooling.
2. Determine the relationship between the elimination of fuel subsidies and the increase in transportation costs.
3. Determine the relationship between the elimination of fuel subsidies and the increase in house rent (cost of living).
4. Determine the relationship between the elimination of fuel subsidies and the increase in the price of products and services.
1.4 Research Questions.
i. How does the withdrawal of fuel subsidies affect the private cost of education?
ii. Is there any relationship between the elimination of fuel subsidies and an increase in transportation costs?
iii. To what extent does the elimination of fuel subsidies lead to an increase in housing rent?
iv. Does the withdrawal of fuel subsidies have any effect on the growth in the price of goods and services?
1.5 Research Hypotheses.
Ho1: The withdrawal of fuel subsidies has no substantial effects on the private cost of education.
Ho2: There is no substantial association between fuel subsidy elimination and increases in housing rent (cost of living).
Ho3: There is no substantial link between fuel subsidy reduction and increased transportation costs.
Ho4: The withdrawal of gasoline subsidies has no major influence on the growth in the price of goods and services.
1.6 Significance of the Study
significance Of The study for the:
I. Government
a. The findings of this study would provide the required knowledge to provide suitable relief for the masses in the aftermath of fuel subsidy elimination.
b. It will provide the government with insight into prudently utilising and revenue earned from gasoline subsidy reduction without any sort of corruption.
c. This study’s findings will push the government to identify and prosecute all of the cabals profiting from the subsidy generosity.
II. Researchers
The conclusions of this study would serve as a reference point for future scholars, forming the foundation of their research work.
iii. Population.
The outcome of this study would provide important information to the people regarding subsidy removal, which may be accomplished with an increase in the cost of living, transportation, goods and services, cost of manufacturing, and so on, but it would lead to:
a. Attracting additional investment to the downstream oil sector
b. The expansion of employment and the economy
c. Discourage the smuggling of petroleum products along our borders.
d. Growth in gross domestic product (GDP)
1.7 Scope and Delimitation of the Study
This study will primarily focus on employees or staff in:
I. Ikeja Local Government Secretariat, Anifowoshe, Ikeja.
ii. Ralimat Islamiyya School, Ikeja, Lagos.
iii. Lagos State Internal Revenue Service (LIRS) Oregun, Ikeja.
1.8 Limitations of the Study
The following factors hampered the research efforts.
1. Finance: this is a big factor since it acts as a barrier to obtaining the necessary information. Also considered are transportation costs and the financial implications for the research’s success.
2. Time Constraint: One of the study’s limitations was a lack of time. Because there is insufficient time between administering surveys to respondents and collecting and collating them for further research, as well as conducting interviews.
1.9 Definition of Terms.
i. Subsidy: Money paid by the government to an organisation to reduce the cost of providing services or producing goods in order to keep prices low.
ii. Palliative: An action that is intended to make a bad situation appear better without truly solving the cause of the difficulties.
iii. A refinery is a plant that refines a substance, such as oil.
iv. Largesse: the act of being generous with money
Gross Domestic Product (GDP): The total value of all products and services generated by a country in a given year.
vi. Cabal: A small group of persons interested in covert plans to gain political power.
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