Impact of Fuel Subsidy Removal on Business in Ebonyi State (a Study of Some Sectors in Abakaliki and Afikpo)

ABSTRACT

This study seeks to determine the Effect of Fuel Subsidy Removal on Business in Ebonyi State, determine the Impact of Fuel Subsidy Removal on Business, the study is also aimed at examining the impact of fuel subsidy removal on transportation. The study is also aimed at determining the impact of fuel subsidy removal on the cost of consumer products and finally aimed at finding out how fuel subsidy removal has affected the standard of living. A descriptive research design was adopted for the study one hundred (100) staff of Mayor Electronics, Chiboy Motors and Peace Mass Transit formed the population of the study. Eighty five (85) of the above stated population were selected as sample of the study. Yaro Yamen formular was used to determine the above stated sample size. The data used in the study were earned through primary and secondary sources. Based on investigations, the researcher concluded that fuel subsidy removal policy should be totally erased as it would not benefit the population under the fuel subsidy removal policy.

 

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

          Although it certainly cannot be seen nor be described as the best new year gift to citizens on January 1, 2012, Nigerians leased citizens, on January 1, 2012, Nigerians ceased to enjoy all forms of subsidies on premium motor spirit (commonly called petrol) courtesy of the new policy announced by the Petroleum Product Pricing Regulatory Agency (PPPRA).

          The question of removing or sustaining the subsidy regime had featured as a dominant topic of public debate in the last three month, but any keen observer would have noticed the government had already made up its mind to do away with the policy (i.e fuel subsidy) which it said costs about N1.3 trillion – 1.5 trillion at the end of 2011 to keep afloat. The PPPRA regulates the downstream oil and Gas industry on behalf of the federal government and in a statement mid-Sunday (January 1,2012) said “By the removal of subsidy on premium motor spirit (PMS), the petroleum industry is deregulated for petrol.

          Deregulation  leaves market forces as the sole determinant of product prices. While over the years, many Nigerian have opposed the implementation of the policy in the oil and Gas industry, international finance donor agencies like the world Bank and IMF have been very harsh in their criticisms of the successive governments that has questioned the policy for a single inherent flaw, they condemned as harmful to the growth of the Nigerian economy –subsidy (Iba, 2012).

          Further more, the issue of fuel subsidy removal has turn the nation into two factions. The government and the economic aspects such as the central Bank Governor; the federal minister of petroleum resources (amongs others) on one hand and the masses led by the NLC, TUCN and CLO on the other hand. (House of Reps 2012, Issues of fuel subsidy removal. www. Themawcoline.com/hous-of repsnews/241 fuel subsidy removal).

          Being a new issue in Nigeria, it is with holistic views such as this can be carried out to enlighten and educate both factions so that the rift can be closed. It is therefore the objective of this study to analyze the impacts of fuel subsidy removal on business in Ebonyi state using some selected business organisations in Abakaliki and Afikpo as case study. And as well make recommendations as to how the government can manage the revenue from fuel subsidy.

1.2     STATEMENT OF THE PROBLEM

          The resolution of fuel regime would be sent to the Nigerian governors forum for transmission to the president. It described the policy as a seem against some state especially the less industrialized ones and it had ‘made the rich to become reacher while the poor becomes poorer. If Nigerians had not protest the removal of fuel subsidy in January 2012, most states would have experienced significant development by now. (Odaah 2012, citizen’s Advocate).

          The present commissioner of finance and development added that the economy is facing some challenges which includes;

  1. HIGH COST OF TRANSPORTATION IN THE STATE: The impact created by policy had not been in favour of the state as the rate or price of transportation has increased.
  2. HIGH COST OF CONSUMER PRODUCT IN THE STATE: as a result of the fuel subsidy removal, the rate and cost of consumer product has increased making it difficult for common individuals to purchase.
  3. GENERAL INCREASE IN COST OF GOODS AND SERVICES: The cost of transporting goods and services in the state has increased due to the removal of fuel subsidy.
  4. REDUCTION IN THE LIVING STANDARD: As a result of fuel subsidy removal, good number of average individuals in Abakaliki and Afikpo are finding it  difficult to maintain their standard of living as generally the standard of lining of the state.
  5. FUEL SCARCITY IN THE STATE: For some weeks back now, there have been the problem of fuel scarcity in the state. Making it very difficult for the business organisations in Ebonyi state to carry out their normal activities.  

Travelers, traders, civil servant and other individuals as motorist and cyclist are finding it difficult to carry out their responsibilities due to limited fuel in filling stations. Even the office man who depend on premium motor spirit (PMS) now gets delayed in rendering services to his customers due to fuel scarcity in the state. (Okonkwo, 2012. citizen’s Advocate)

OBJECTIVE OF FUEL SUBSIDY REMOVAL

The objectives of fuel subsidy removal includes:

  1. To ensure stability and uniformity in the prices of petroleum products that is consumed in the country, regardless of the product from the refineries to the various depots and there on to the filling stations.
  2. To build refineries for the nation and by so doing reducing the price of transportation.
  3. To increase transportation rate at a low cost by recreating the rail ways system and water transportation system in Nigeria. (Odioga 2012, Vanguard News  paper)

1.3     OBJECTIVE OF THE STUDY

          The main objective of this work is to analyze the impact of fuel subsidy removal on business in Ebonyi state.

          Other sub-objectives includes:

  1. To find out the impact of fuel subsidy  removal on the cost of transportation.
  2. To know the impact of fuel subsidy removal on the cost of consumer product.
  3. To find out how fuel subsidy removal has affected the standard of living.

1.4     RESEARCH QUESTION

The following questions will help us in ascertaining the objectives of this research work;

  1. How has fuel subsidy removal affect the business activities in Abakaliki and Afikpo?
  2. Does fuel subsidy removal have any effect  on transportation of goods and services in Abakaliki and Afikpo?
  3. Does fuel subsidy removal really have any thing to do with the standard of living in Abakaliki and Afikpo? If Yes, how?
  4. How has fuel subsidy removal affect consumer products in Abakaliki and Afikpo?
  5. How has fuel subsidy removal affected the price of goods and services in Afikpo and Abakaliki?

 

1.5     SIGNIFICANCE OF THE STUDY

There are good number of people who will benefit from this research work, First are the selected business organisations in Abakaliki and Afikpo.

Secondly, students and other up-coming researchers who may decide to research further on this topic.

The government, would also benefit from this research work as it can make reference to this work  in handling the issues of fuel subsidy removal in the state and how to manage  the revenue from fuel subsidy removal.

The public in general will also find this research work beneficial as who so ever wishes to broad or have a broad idea pertaining on the issue to fuel subsidy removal in the state would find this research work interesting.

1.6     SCOPE OF THE STUDY

There are many organisations in Ebonyi state, thus, it will be very difficult if not impossible to cover them all within the short period allowed for this work.

          Consequently, the study is made to cover especially the selected organisation in Abakaliki and Afikpo.

          On the other hand the time frame allowed  for this work is limited.

1.7     LIMITATION OF THE STUDY

          At the cost of carrying out this research work, the researcher encounters the following limitations;

  1. FINANCE

As a result of the researcher being  a student he does not have enough amount of money to carry out all that is needed in making the project work a success.

High cost of gathering and accessing information and materials needed for  the work, payment of jobs done by the typist, traveling expenses to the organisations under the study which are located away form the institution of the finder are other examples of the researcher limitations. Being a student who is dependent, little money is at his disposal to support the work.

  1. TIME FACTOR

The period set aside for the completion and submission of this project report was not enough for the researcher to carry out in details on the topic.

  1. EXPERIENCE

The researcher lacks much experience to enable him analyze more on how fuel subsidy removal affects the economy of Ebonyi state. The researcher does not also have the required experience for him to develop an additional principles and techniques on fuel subsidy removal.

    1. DEFINITION OF TERM

FUEL: a substance that produces useful energy when it undergoes a chemical or nuclear reaction (Oxford advanced learners dictionary)

Subsidy: A money paid by the government or an organisation to reduce the cost of services or of producing goods so that their prices can be kept low (Oxford dictionary 2001).

FUEL SUBSIDY: A financial assistance given by a government in other to balance the payment of procurement and p of fuel in a given nation or state (free dictionary – www.free dictionary.com).

REMOVAL: The act of moving or taking away some thing from its position or place (Oxford dictionary 2001).

Business: Any form of occupation through which men at the risk of loss, seek to make income above their costs through manufacture of items as well as buying and selling of goods and services of others at a profit (Oxford dictionary 2001).

BUSINESS: Any form of occupation through which men at the risk of loss, seek to rake in income above their costs through manufacture of items as well as buying and selling of goods and services of others at a profit (Igwegbe 2014 – principle of management 1).

Impact: contribution made by some one or something to another  (oxford dictionary 2001).

 

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