ABSTRACT
This
study examines the effects of fuel subsidy removal on Nigerian’s standard of
living in Lagos State in which 50 civil servants were randomly selected in
Ikeja for the purpose of the study. Statistical data for about eight different
periods where fuel hike occurred in Nigeria was revealed and the instrument
used to collect the data was questionnaire which contained sixteen questions.
Data collected was dully analyzed with the help of chi-square. So, it was
deduced from this study that increase in fuel pump price which resulted from
fuel subsidy removal has an adverse effect on the standard of living of the
people, since fuel is essential for the transportation of major commodities,
such as agricultural produce and other market product in Nigeria.
TABLE OF CONTENTS
TITLE PAGES
Title page i
Certification ii
Dedication iii
Acknowledgement iv
Table of content v
Abstract viii
CHAPTER ONE: INTRODUCTION
1.1
Background
of the Study 1
1.2
Statement
of the Problem 5
1.3
Purpose
of the Study 6
1.4
Research
Questions 6
1.5
Research
Hypotheses 7
1.6
Significance
of the study 7
1.7
Scope/Delamination
of the study 9
1.8
Limitation
of the Study 9
1.9
Definition
of Terms 10
CHAPTER TWO: LITERATURE
REVIEW
2.1 An Overview of the Structure of Nigerian
Economy 11
2.2 Oil/Petroleum Sub-Sector in Nigerian
Economy 15
2.3 Fuel Subsidy and its Removal in Nigeria 17
2.4. Economic Development Growth and
Development and Standard of Living 21
2.5 Factors that Determines the Standard of
Living 24
2.6 Challenges to Economic Development in
Nigeria 27
2.7 Impact of Subsidy Re-Investment and
Empowerment Programme (Sure – P) in the Economy 30
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction 34
3.1 Research Design 34
3.2 Population of the Study 34
3.3 Sample and Sampling Techniques 34
3.4 Instrument for Data Collection 35
3.5 Validity of Instruments 35
3.6 Reliability of Instrument 35
3.7 Method of Data Collection 36
3.7 Method of Data
Analysis 36
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1 Introduction 37
4.2 Organization
of Personal Data 37
4.3 Data Analyses and Discussion 40
CHAPTER FIVE: SUMMARY,
CONCLUSIONS AND RECOMMENDATIONS
5.0 Introduction 46
5.1 Summary of Findings 46
5.2 Conclusion 47
5.3 Recommendations 48
References 50
Appendixes 52
CHAPTER ONE
INTRODUCTION
1.1
Background of the Study
Research
on the effects of fuel subsidy removal on Nigerian’s standard of living has
been on interest to the economy and Nigerians. This research evidence will show
the effect of fuel subsidy removal on the standard of living of Nigerians.
Petroleum
is the mainstay of the Nigerian economy. It plays a very crucial role in
shaping and modifying the economic, political and social destiny of the
country.
The
discovery of oil in commercial quantities at Olobiri in the Niger Delta and
later at Afam and Boma in the 1960s established Nigeria as oil producing
nation. The oil sector, as the prime mover of the economy became apparent in
the 1970s due to the dramatic increase in oil process and the rise in the nation’s
proven oil reserves and production.
Subsidy
has been defined as aids directly granted by government to an individual or
private commercial enterprise deemed beneficial to the public. (Ogundipe D.O.
2013).
According
to Ogundipe D.O. 2013, Fuel Subsidy can be said to be the financial aid granted
to autonomous and foremost oil marketers by the government for them to supply
their products as a cheaper rate for the good of the masses. This move is
almost always aimed at boosting the economy of a country, providing social
amenities for the people, stabilizing the market, creation of employment
opportunities and of course the new theory of it is capable of fighting
corruption as postulated by the Nigerian government. The issue of subsidy is
not alien to the nation’s down-stream because it existed during the military
regime when the four refineries of the nation could only produce little which
could not even satisfy the domestic needs of the people. Then, a need arose for
the importation of finished petroleum products such as diesel, petrol and
kerosene to meet the domestic need of Nigerians. For this reason, the
influential Nigerians and those in the corridor of power considered the sudden
wealth that will result from this opportunity and started acquiring the various
wells in the country and finally, they overtook the petroleum industries. This
undoubtedly was the birth of the child of fuel problems Nigerians are nurturing
today especially as it affects petroleum.
On
the first day of January, 2012 Nigerians woke up to face one of the greatest
shock of their lives when the removal of fuel subsidy was announced by the
federal government at a time perceived 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 raised the price of a litre of petrol from N65 to N141.
A drive through the memory lane revealed that subsidy was once removed on
kerosene and diesel by the then Federal government of Nigeria on reasons
similar to one gave by the President Jona led administration and with promises
that such policy will have a long lasting positive effects on all areas in the
nation. However, nothing tangible could be said to be the celebrated outcome of
the said policy. It was argued by the then federal government that the removal
of subsidy on diesel and kerosene would make the products available and
affordable but it turned out to be a fallacious fabrications, the products have
become more scarce and expensive, instead of the promise of its expensive,
instead of the promise of its availability. Saddening enough, none of the
crippled refineries was brought back to its feet from the money realized from
the removal of subsidy on diesel and kerosene. One begins to wonder if the time
honoured saying ‘once bitten twice shy’ was not the rhythm in the minds of
long-suffering Nigerians when the Petroleum Products Pricing and Regulatory
Agency (PPRA) announced the infamous policy on the 1st of January, 2012.
After
weeklong protests by Nigerians, which
was led by the Nigerian Labour Congress (NLC), Trade Union Congress (TUC), and
some civil society groups, government bowed to public pressure not to remove
the fuel subsidy entirely in view of some negative effects it would unleash on
the populace, especially where there was absence of palliative and coupled with
the fact that the government took the people by surprise. The government after
much hesitation, made a U-turn in her policy, partially removed the subsidy and
reduced petrol price from N141 to N97 per litre. Although, it was not a return
to status quo, Nigerians had wanted but they heaped much of their hope on
government planned palliative to cushion the negative effects the partial
removal of the fuel subsidy would have on the masses. Unfortunately, most of
the promised palliative such as massive job creation, easy transportation and
other goodies did not get out of government’s drawing board.
Early
2014, the same government was again touting with the idea of removing what
remained of the subsidy, which the people thought is the only benefits they
derive from the nation’s naturally endowed petrol – dollar largesse. The
government argued that a tiny percentage of Nigerians called the cabal are the
ones hugely profiting from the subsidy largesse and that the current low price
of oil will always encourage smuggling of the product along our numerous porous
boarders. Government also said that the total fuel subsidy removal will attract
more investment in the downstream oil sector which will boost employment and
the economy.
Although,
the government arguments may sound convincing, Nigerians have a pathetic tale
and manifold frustrations to express over many years of government’s fuel price
hike based on terrible regimes and the failure by the government to deliver on
its promises.
1.2 Statement
of the Problem
The
government policy of fuel subsidy removal was to bring about positive effects
and changes to the economy through subsidy reinvestment programme (SURE – P)
and to eradicate oil related corruption, thereby increasing the standard of living
of Nigerians.
However,
Fuel subsidy removal would have the following negative effects on Nigerians:
i.
Lack
of adequate palliative such as massive job creation, easy transportation and
regular supply of electricity to cushion the negative effects.
ii.
Increase
in cost of production which will be resulted from increase in fuel price.
iii.
Increase
in the cost of providing services
iv.
Increase
in house rent (cost of living)
v.
Increase
in transportation cost
vi.
Fall
in the standard of living
vii.
Increase
in the prices of goods and services
viii.
Increase
in corruption
ix.
Increase
in the cost of education
1.3 Purpose
of the Study
This
study aims at assessing the effects of fuel subsidy removal on Nigerians’
standard of living. The purpose of the study is summarized as follows:
1.
To
find out whether fuel subsidy removal has any effect on the private cost of
education
2.
To
find out the relationship between fuel subsidy removal and increase in
transportation cost
3.
To
find out the relationship between fuel subsidy removal and increase in house
rent (cost of living)
4.
To
find out the relationship between fuel subsidy removal and increase in the
price of goods and services
1.4 Research
Questions
i.
Does
fuel subsidy removal has any effect on the private cost of education?
ii.
Is
there any relationship between fuel subsidy removal and increase in cost of
transportation?
iii.
To
what extent is the relationship between fuel subsidy removal and increase in
house rent?
iv.
Does
fuel subsidy removal has any effects on the increase in the prices of goods and
services?
1.5 Research
Hypotheses
Ho1: There
is no significant effects of fuel subsidy removal in the private cost of
education.
Ho2: There
is no significant relationship between fuel subsidy removal and increase in
house rent (cost of living)
Ho3: There
is no significant relationship between fuel subsidy removal and increase in transportation
cost
Ho4: There
is no significant effects of fuel subsidy removal on the increase in the prices
of goods and services.
1.6 Significance
of the Study
The
significance of the study to the:
i. Government
a.
The
result of this study would give necessary information to provide adequate
palliative for the masses to cushion the native effects of fuel subsidy
removal.
b.
It
will give the government an insight to judiciously utilized and revenue
generated from fuel subsidy removal without any form of corruption
c.
This
study outcome will prompt the government to get all the cabals behind the
profit from the subsidy largesse and bring them to book
ii. Researchers
The
findings of this study would serve as reference point for future researchers,
which would form the basis of their research work.
iii. Populace
The
outcome of this study would provide necessary information to the populace over
the subsidy removal, though may be accomplished with increase in cost of
living, transportation, goods and services, cost of production etc. but it will
lead to:
a. Attraction of more investment in the
downstream oil sector
b. The boosting of employment and the
economy
c. The discouragement of smuggling of
petroleum product along our boarders.
d. Increase in gross domestic product
(GDP)
1.7 Scope/Delimitation
of the Study
This
study will mainly be focused on workers 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 Limitation
of the Study
During
the research work, the following were the factors militated against the
research work.
1.
Finance: this is the major factor as it
serves as a barrier for acquiring the needed information. Also transport cost
and financial implication for the success of the research work.
2.
Time Factor:
limited time was one of the constraints of the study. As no enough time
required for the execution time is involved between when the questionnaires
were administered to the respondents and when they are collected and collated
for onward analysis and also in carrying out interviews.
1.9 Definition
of Terms
i.
Subsidy: Money that is paid by government of
an organization to reduce the cost of services or of producing goods so that
their prices can be kept low.
ii.
Palliative: An action that is designed to make a
difficult situation seem better without actually solving the cause of the
problems
iii.
Refinery: a factory where a substance such as
oil is refined
iv.
Largesse: An act of being generous with money
v.
Gross Domestic
Product (GDP): The total value of all the goods and services produced by a
country in a year.
vi.
Cabal: A small group of people who are
involved in secret plans to get political power.
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