Project Materials

INDEX NUMBER ANALYSIS ON THE PRICE OF PETROLEUM ON THE PRICE OF FOOD ITEMS

Chapter one

INTRODUCTION

1.1. Background of the study

The impact of petroleum prices on food and the Nigerian economy cannot be overstated. Petroleum items include aviation fuel and kerosene, to name a few; this is purely owing to the economy’s lack of diversification. According to Mahmud (2009), the petroleum sector accounts for 85% of Nigeria’s GDP.

Prior to the discovery of crude oil in the early 1970s, agriculture was the primary driver of the economy, which aided in the country’s development. During these times, there were few incidents of product and service price increases. Food price stability is critical for any nation seeking progress, because only a healthy workforce can provide their all in terms of work and output.

Over time, there may have been some debate concerning the relationship between petroleum prices and food price indexes. Some schools of thought argue that petroleum prices have nothing to do with food prices, questioning agricultural stakeholders and traders for massive exploitation during price volatility of petroleum products, whereas others believe that petroleum products do affect food prices.

Petroleum is thought to have a huge negative impact on the economy and even agricultural products. This typically occurs in the economies of the West African sub-region, which are not generally diversified. Any oil-producing nation that does not want its people to be impoverished must diversify its economy in order to prevent problems in one area from spilling over into others.

Food items are a crucial commodity for a healthy nation; the supply of food to any nation must be done without compromise, since anything less than appropriate preparation may result in a food shortage, which may have an impact on the country’s economy.

Every relevant administration should always ensure that enough food supply remains unspoiled and is not harmed by either petroleum

1.2. Statement of The Problem

The fluctuation of agricultural food items in Nigeria has long been a source of concern, which is bad news for a rising economy like ours.

A nation that plays with its agricultural sector is a nation that will confront shortage of food supply which may not pan out for a large country like Nigeria.

The problem of food prices rising every time there is a small shift in the price of petroleum products has prompted us to conduct this investigation.

1.3 Significance of the Study

This study would be valuable to policymakers, national economic researchers, and, most importantly, the Nigerian government in addressing food scarcity in Nigeria and guaranteeing food security.

1.4. Goals and Objectives of the Study

1. This study examines the relationship between petroleum price fluctuations and food costs in Nigeria.

2. This study examines the relationship between petroleum prices and food prices in Nigeria.

3. his study aims to estimate how petroleum and food prices would impact the national economy.

4. To provide solutions for achieving food security in Nigeria.

1.5. Research questions.

Is there a correlation between the cost of gasoline and food products?

Ø What is the link between petroleum and food prices?

What are the measures to ensure food security in Nigeria?

Ø How do petroleum and food prices affect the economy?

1.6. Research Hypothesis

H0: There is no substantial link between petrol costs and food prices.

H1: There is a considerable correlation between the prices of petroleum products and food items.

1.7. Scope of the study

This study examines the effect of petroleum prices on food prices between 1999 and 2013.

1.8 Limitations of the Study

Financial constraints- Insufficient funds tend to restrict the researcher’s efficiency in accessing appropriate resources, literature, or information, as well as in data gathering.

Time constraints: The researcher will conduct this investigation while also working on other academic projects. This will reduce the amount of time spent on research.

1.9. Definition of Terms

Petroleum is a liquid found on Earth that contains hydrocarbons, organic molecules, and trace amounts of metal. While hydrocarbons are usually the primary component of crude oil, their composition can range from 50% to 97% depending on the type of crude oil and the method of extraction.

The economy refers to all activities associated to producing, consuming, and trading goods and services in a given area. The economy affects everyone, including individuals, organisations, and governments.

The economy of a specific region or country is influenced by its culture, laws, history, and geography, among other variables, and it evolves as a result of necessity.