EFFECT OF FUEL CRISIS IN NIGERIA ECONOMY 2010 – 2022
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EFFECT OF FUEL CRISIS IN NIGERIA ECONOMY 2010 – 2022
Chapter one
INTRODUCTION
Background to the Study
In Nigeria, fuel price rises are common. A surge in petrol prices usually has an impact on the nation’s economic operations. The increase may result in higher pricing for goods and services, transportation, salary increases, and other costs.
All of these have a negative impact on the state’s economy and overall population. Nigeria’s economy relies heavily on oil for cash and earnings. As a result, the government’s plans and financial allocations are currently centred on oil exports and internal use.
Because of oil’s fundamental importance to national economies, the economy’s focus on a single export good has altered, making it easier for politicians to manage. The most serious threat to Nigeria is that oil has become the country’s sole export, and the economy now revolves solely upon it.
Agriculture was the foundation of the Nigerian economy until the early 1970s. Previously, the country was well-known for its ability to produce groundnuts, which resulted in pyramid-shaped groundnut fields in Kano, oil palm plantations, and speedier cocoa in the country’s west.
The country’s economy saw dramatic changes after large amounts of oil were discovered there. The government now relies solely on oil for foreign exchange revenues, rather than agriculture, as all other sectors appear to have vanished or been abandoned.
Since then, all attempts to diversify the country’s economy have failed. Oil has been the target of political manipulation because of its importance to national economies, which is a natural byproduct of the economy becoming reliant on a single export good.
But the greater concern to Nigeria is that it relies solely on oil as an export and that its economy is built around it. Almost every vital service offered in the country revolves around it.
Oil is essential for practically every other economic area. Any speculation about the product’s scarcity or unavailability will undoubtedly spell death for the country’s economy (Sikkam, 2009).
According to Yemi (2012), the country has recently experienced full scarcity, which appeared to be harsher in the early years. This has caused a significant deal of distress, unhappiness, and disruption in a variety of activities, including the economy.
Today, there are very few specific businesses, organisations, and organisations in Nigeria that have not been badly impacted. In government circles, it is widely acknowledged that bottlenecks in the distribution system are largely to blame for the prolonged petrol shortage.
However, a survey finds that the delays and other inefficiencies are the result of conflicting operations by several government bodies.
Furthermore, there are issues with a lack of manpower, insufficient funding, a lack of materials, legal restrictions, and personnel safety, which officials explained have hundreds of departments to petroleum resources (DPR) in the petroleum products, which worsens the crisis in Nigeria despite DPR efforts (Nwankwor,1981).
The issue worsened day by day, with some petrol stations selling fuel to a black market in the middle of the night, hiking prices from N350 to N500 per gallon depending on the degree of kerosene adulteration.
With comprehensive cooperation monitoring and general supervision of product random sampling at numerous filling stations, it was determined that filling stations were the source of the continuous gasoline scarcity.
The fuel shortage was thought to be exacerbated on occasion by hoarding, fuel diversion, smuggling, and underdelivery at retail shops. Despite the efforts of the ministry and parastatals, the NNPC has almost completely failed to prevent sabotage in the country’s oil industry.
According to a research, Nigeria consumed 8.509 million litres of fuel each day between January and March 1999, with an extra 6.883 million litres imported, bringing the total amount of fuel available to 15.392 million litres. According to Allwell (2012), the country’s smugglers and saboteurs contributed significantly to the scarcity.
Despite the NNPC’s official efforts, which culminated in the first-ever statewide exercise known as “operation crush,” the petroleum situation remains unresolved. The station is purportedly managed by economic saboteurs who divert the majority of the fuel supply meant for regular use to the black market.
According to Nwosu (2009), oil smuggling will continue to be a profitable sector as long as surrounding countries’ oil prices remain high and petroleum products are underpriced. According to Arinze (2011a), the current petrol crisis is the result of poor management.
Despite the negative effects of rising fuel prices, the Federal Government of Nigeria stopped subsidising petroleum on January 1, 2012. For many years, Nigerians have benefited from low petrol costs.
What economic consequences will the country face now that this advantage has expired, aside from the well anticipated protests planned by various groups such as Labour, Occupy Nigeria, and gasoline subsidies?
This study will try to reflect the economic repercussions without advocating for or against the withdrawal of subsidies. The Nigerian government would need to consider these consequences immediately away or plan for them in the near future.
According to Osogie’s (2012) projection, real GDP growth will decline if petrol prices remain constant. Furthermore, the increase in petrol prices and the possibility of unequal pricing within the federation will raise consumer price inflation by 3 to 5 percent points in 2012.
The increase in petrol prices will have an impact on both household income and consumption. If the minimum income eventually hits N18, 000, its value will continue to fall as inflation rises.
Every year, the average household spends an additional N75,000 on energy-related goods and services, but their savings rate plummets. The drop in saving rates would result in the loss of over half of Nigeria’s current middle-class population, mitigating the short-term negative effects that rising prices would normally have on the economy. Consumer spending will fall dramatically in the coming years as people work to adjust and build new reserves.
Statement of the Problem
The high cost of full price has hampered Kogi State’s social and economic activities, resulting in a significant increase in market pricing for products and services. Recent market study in Kogi State, such as the Itobe and Anyigba markets, found that a lack of petrol was the primary cause of the high prices.
The building supply markets in Lokoja and Okene have recently experienced major price rises. A brief look at the prices reveals that building supplies have gone risen in price.
For example, a complete white bath tub cost N 9,375.00 in August 2011 and is now N 11,500.00, while a bundle of zinc costs N 10,200.00, up from N 8,000 in August 2011.
A short look at the grocery market indicated a substantial increase: a bag of rice, which cost N7,000 in 2011, now costs N9,000, and a tin of brown beans costs N6,550, up from N4,500 in August 2011. According to certain market participants with whom I spoke, the removal of gasoline subsidies increased petrol pump prices.
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