ABSTRACTS
The research work is aimed at examining the effects of subsidy removal on road transport fare in umuahia. The objective includes, To examine the effects of subsidy removal on cost of living. To measure the effects of subsidy removal on inflation, and effect of subsidy removal on transport fare. Three transportation were developed. The researcher made use of primary data, 150 questionnaire were distributed to the respondent, descriptive statistics was used to present the data on tables, and simple regression model was used to test the hypotheses. Finally, majority of the respondent agree that subsidy removal will affect cost of transportation. Fuel subsidy removal has significant impact on inflation and transportation.
TABLE OF CONTENTS
Tile page……………………………………………….………………………………………………… i
Approval page……………………………………...……………………….………………………… ii
Dedication………………………………………………………………………………………….…… iii
Declaration……………………………………………………………………………………………… iv
Acknowledgement……………………………………………………………………………….….. v
Table of contents…………………………………………………………………………………….. vi
List of Tables………………………………………………………………………………………...…..xi
Abstract…………………………………………………………………………………………………… x
CHAPTER ONE
Introduction
1.1 Background to the study……………………………………………………………………… 1 1.2 Statement of the problem ……………………………………………………………………. 4
1.3 Objective of the study…………….……………………………………………………..………5
1.4 Research questions……………………………………………………………………………....6
1.5 Research hypothesis…………………………………………………………………………….6
1.6 Significance of the study……………………………………………………………………… 7
1.7 Operational definition of terms…………………………………………………………….7
1.8 Limitation of the study…………………………………………………………………..….…8
1.9 History of transport companies in umuahia…………………………………..…… 8
CHAPTER LITERATURE REVIEW
2.2 Empirical Review ……………………………………….……………………………………. 10
2.3 History of subsidy removal in Nigeria economy…………………………………. 11
2.4 Meaning of deregulation ……………………………………………………………..………19
2.5 Meaning of fuel subsidy removal ……………………………………………………..…25
2.6 Effects of fuel subsidy removal on transportation …………………………….… 27
2.7 Impact of fuel subsidy removal on Nigeria economy ………………………..… 29
CHAPTER THREE
RESEARCH METHODOLOGY
3.1Research design ……………………………………………………………………………….34
3.2 Areal of study ………………………………………………………………………………… 35
3.3 Population of study ………………………………………………………………………… 35
3.4 Sampling size determination ……………………………………………………..……. 35
3.5 Sampling techniques ……………………………………………………………….……… 36
3.6 Sources of data selection …………………………………………….…………….…….. 37
3.7 Data analysis techniques ………………………………………………….……………….37
3.8 Model of Specification …………………………………………………………….…………37
CHPTER FOUR
PRESENTATION AND INTERPRETATION OF RESULT
4.0 Introduction/ Findings …………………………………………………………………… 40
Discussion of findings ……………………………………………………………………………41
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Summary………………………………………………………………………………………..64
5.2 Conclusion …………………………………………………………………..…………………65
5.3 Recommendation……………………………………………………………………………65
Reference
Appendix
LIST OF TABLE
TABLE PAGES
Table 4.1: Distribution of the respondents according to gender, age …………41
Table 4.2: Distribution of respondents according to marital status ………..…42
Table 4.3: Based on workers educational qualification ……………….…………….44
Table 4:3a: Based on agreement with subsidy removal…………………………….44
Table 4:3b: Based on effect of subsidy removal on cost of transportation.…44
Table 4:3c: Based on justification for subsidy removal ……………………………..45
Table 4:3d: Based on reason for subsidy removal ………………………………..…..46
TABLE 4:3e: Based on Determination of effect of subsidy removal …………47
Table 4:3f: Fuel subsidy removal brought about increase in cost of living….48
Table 4:3g: Fuel subsidy removal lead to inflation ..…………………………………..49
Table 4:4a: Impact of fuel subsidy removal on cost of living ……………………..52
Table 4:4b: Impact of fuel subsidy removal on inflation …………………………..55
Table 4:4c: Impact of fuel subsidy removal on transport fare ……………………58
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Nigeria is a country blessed with vast mineral resources prominent among which are the oil and gas reserves. The country possess 28% of Africa’s proven oil reserves, second to Libya and is the largest producer of crude oil in the region, producing 2.4million barrels per day in 2010 which is about 24% of the continent’s petroleum (Siddig: 2013).
The issue of fuel crises has become a common phenomenon in Nigeria at it’s pathetic to observed that no other OPEL member country that does not produce oil, share similar ugly experience with Nigeria (Badmus: 2009) prior to this situation, there were moments of joy among Nigerians, when the four refineries were working at full capacity, but according to Badmus (2009), the local refineries could not be managed properly and they produced below the installed refining capacities, thereby making it imperative for demand to be met through importation. The import dependency which constituted over 82 percent of the total supply of petroleum products consumed locally invoked protest from different quarters in the country. The undesirable situation led to the introduction of the controversial issue of subsidy in the downstream oil sector, which nearly tore the country into pieces and still threatening the peace and the existing democratic structure. In Nigeria subsidy in economic sense, exists when consumers of a given commodity are assisted by the government to pay less than the prevailing market price of same. In respect of fuel subsidy, it means that consumers would pay less than the pump price particle of petroleum product. Fuel subsidy could be seen as the difference between the actual market price of petroleum products per litre and what the final consumers are paying for the same products.
Developing countries have used fossil fuel subsidies for consumers primarily as means of achieving certain social economic and environmental objectives, as identified by Brazilian and Yeyi (2012). These include activating energy, poverty and improving equity, increasing domestic supply, national resources wealth redistribution, correction of externalities and controlling inflation.
Subsidy is a pricing design that keeps the price consumers pay for products below market levels to specifically make targeted goods and services affordable to consumers who ordinarily may not be able to afford them. Subsidies could benefit people and businesses in the form of tax deductions, grants exemption or price control.
In Nigeria, fuel subsidy are designed in the Petroleum Product Pricing Regulatory Agency (PPPRA: 2013) template is the compensation due to importers of petroleum products based on the difference between landing cost less ex-depot price of fuel. This is to ensure that consumers pay a regulated amount of gasoline at the same time, ensuring that producers get their real costs remunerated. It is a scheme meant to alleviate poverty by providing energy security for the country; subsidies affect prices or costs indirectly.
According to Eyiuch (2012), the federal government embarked on removing the subsidy on fuel with the aim of making petroleum products available, to cushion the effect of actual market prices of the general populace. During the military era, the federal government was of the opinion that the cost of production transportation of fuel will be a heavy burden for the poor Nigerians to bear alone, therefore decided to pay part of the amount of the fuel cost for every Nigeria in order to make the product available and affordable. The benefits of fuel subsidy were short lived to the average Nigerian. The federal government on January 1st 2012 announced the end of fuel subsidy, with a bid to use the money accrued from fuel subsidy to develop other sectors of the economy and ensure development and wealth generation for the nation. The removal of fuel subsidy by the Nigerian government raised a lot of dust. The effect of subsidy removal by the federal government generated a lot of debates by Nigerian Labour Congress (NLC) owing to its socio-economic implications in the nation’s economy. Many artisan who cannot afford power generator are out of business now, many youths are forced by hardship to riding motorcycle and tricycles.
1.2 Statement of the Problem
On 1st January 2012 when President Goodluck Ebele Jonathan announced the removal of fuel subsidy, Nigerians did not embrace the policy. Many Nigerian reacted negatively; the Nigeria Labour Congress and government workers went on strike. This made Nigeria to lose a huge amount of money to N100billion naira (Emeh: 2012). The removal of fuel subsidy generated inflation in the country which brought about a high cost of fuel and even other items in the market. The removal of fuel subsidy brought about mass poverty; this is because the prices of goods/services increased while incomes of people still remain constant (Emeh: 2012). The general welfare of the people was worsened as a result of affected cost of transportation. Nigerians were also traumatized by the news of the new policy and it also brought about violent demonstrating which distorted the peace and tranquility of the country. The subsidy removal leads to increase in cost of transportation and inflation across all sectors of the economy.
1.3 Objective of the Study
The main objective of the study is to evaluate the effect of subsidy removal on road transport fare in Umuahia, the specific objective includes to;
i. examine the effects of subsidy removal on the cost of living;
ii. measure the effects of subsidy removal on inflation.
iii. measure the effects of subsidy removal on transportation fare in Nigeria.
1.4 Research Questions
The following research questions will be stated to serve as a guide or direction to the study;
i. What are the effects of subsidy removal on the cost of living?
ii. What is the effect of subsidy removal on inflation?
iii. What are the effects of subsidy removal on transport fare in Nigeria?
1.5 Research Hypothesis
The following research hypothesis will be state in their null terms:
Ho1: Fuel subsidy removal does not affect the cost of living.
Ho2: The removal of fuel subsidy does not generate any inflation in the economy of the country.
Ho3: The removal of fuel subsidy does not affect high cost of transport fare in Nigeria.
1.6 Significance of the Study
The study will be useful to Academia and researchers and government.
i. Academia: The research is intended to contribute to the growing body of literature on the effect of fuel subsidy removal on road transport fare.
ii. The government: The findings will be very useful to the government, to be able to adopt approach that will benefit Nigeria citizen.
iii. The Researcher: The study will be educating as it will be reference point for subsidy removal and effects.
1.7 Operational definition of terms
Fuel Subsidy: The amount of money that the government pays to the fuel importers while importing fuel so the price of fuel will be cheaper for the people to purchase.
Impact: Consequences and outcome.
Removal: Elimination, withdrawal or taking away
Transportation: This is the activity of moving people or things from one place to another, petroleum product, pricing regulatory agency.
Deregulation: The removal of government control in a particular sector so as to create more and better competition within the industry.
1.8 Limitation of the study
The researcher was faced with the problem of finance as null as the negative altitude and non cooperation of the respondents to give information.
1.9 Brief History Of Some Transport Companies In Umuahia, Nigeria
The Young Shall Glow Transport Limited:
The company commences business in 1972 as a mini bus transport operator running Umuahia to Onitsha n the east central state of Nigeria. By 1973 the company moved its operational base from Onitsha to Lagos and expanded into urban commuter bus business which blossomed from a fleet of two locally built Mercedes Benz 911 bases to over 40 within a period of seven years. Young shall grow transport launched in inter-state passenger conveyance services in 1978 with a new Brazilian made Mercedes Benz 0362 luxury bus, which operated along Umuahia-Onitsha, Onitsha-Lagos route. The company was incorporated as a private limited liability company in 1984 with the main objective of expanding its business as an inter-state luxury bus operator.
ABC Transport Plc:
The company was incorporated in Nigeria on 5th April 1993, as a private limited liability company with the name associated Business Company limited to engage in the business of transportation and ancillary services. ABC transport plc commenced operation on road passenger transportation on February 13 1993 as an off-shoot of rapid ventures with a view of running a modern road transportation system in Nigeria. The operations within and outside Nigeria are carried out in ultra modern terminals with comfortable lounges in various cities like Umuahia, Lagos (Jibowu), Owerri, port-Harcourt, Abuja, Enugu, Onitsha, Jos and Accra Ghana.
Bestway Transport Limited:
The company is founded in 1998, Bestway transport limited is one of the largest providers of inter-state bus transportation service more than 25 destinations with tens of daily departures across Nigeria icon, providing safe, enjoyable and affordable travel to nearly 10 million passengers each year. The company has other operations in the Nigeria with other transport companies which operated along Umuahia-Lagos, Owerri, Onitsha and other cities in Nigeria.
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