CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
Oil is used in almost every industry of the economy. Any consideration of a probable scarcity or unavailability of the commodity will, without a doubt, result in an unwarranted increase in petroleum prices in the country (Sikkam, 2009).
According to Arinze (2011), the increase in fuel prices is a result of poor management. Regardless of the negative consequences of higher fuel prices, Nigeria’s Federal Government stopped subsidizing petroleum on January 1, 2012. Nigerians have enjoyed inexpensive gasoline costs for decades, but those advantages are no longer available. Fuel costs should be consistent, regulated by the government, and altered infrequently. Between August 2005 (US$0.50) and December 2011 (US$0.41), the Nigerian fuel price was 65 cents per liter, except in 2007 and 2008, when it was hiked to 75 cents per liter for a little time.
The impact of rising gasoline prices could go beyond simply raising transportation costs. It also has an impact on the price of goods and services. Food, clothing and footwear, furniture, and, most critically, businesses are struggling to carry out operations as a result of the scrapping of the gasoline price subsidy. Housing and utility expenses are also rising as a result of the cutting of the fuel price subsidy. According to Yvonne Mhango, an analyst at Renaissance, “in addition to rising gasoline costs, the cost of producing electricity from petrol-powered generators for businesses also rises.”
The impact of a higher petrol price on food, according to Mhango, is likely to resonate with the majority of Nigerians. According to rough estimates, transportation costs account for around 10% of the entire cost of producing food in the United States.
STATEMENT OF PROBLEM
Because of the high cost of fuel, some businesses in Nigeria have been paralyzed. As a result, there has been an unendurable problem in the operations of businesses in Nigeria, as most of their activities need the use of fuel due to a lack of consistent electricity. In Nigeria, for example, most businesses use gasoline to power their electrical supply machinery (in the absence of electricity) and their transportation vehicles. However, because of the unpredictable growth in the price of fuel, there hasn’t been enough consistency in the price of fuel. As a result of this unappealing threat, businesses in the country face increased costs in transportation, marketing, and administrative activities. This, in turn, has an impact on the cost of a company’s products and services.
OBJECTIVES OF THE STUDY
The purpose of this study is to determine the impact of increased fuel prices on business operations using Gourmet Pizza Company, Abuja as a case study. Other specific goals include:
To see if the increase in fuel prices has an impact on business performance.
Examine the link between the rise in gasoline prices and the expense of doing business.
Determine whether an increase in the cost of fuel has an impact on the cost of a company’s products and services.
To see if the increase in fuel prices boosts corporate profitability in Nigeria.
PURPOSE OF THE STUDY
The purpose of this study is to determine the impact of increased fuel prices on business operations using Gourmet Pizza Company, Abuja as a case study. Other specific goals include:
To see if the increase in fuel prices has an impact on business performance.
Examine the link between the rise in gasoline prices and the expense of doing business.
Determine whether an increase in the cost of fuel has an impact on the cost of a company’s products and services.
To see if the increase in fuel prices boosts corporate profitability in Nigeria.
RESEARCH QUESTIONS
What impact will the increase in fuel prices have on business operations?
Does the increase in fuel prices have an impact on business performance?
Is there a link between the increase in fuel prices and the expense of doing business?
Does an increase in the price of gasoline have an impact on the cost of a company’s products and services?
Does the increase in fuel prices increase the profitability of Nigerian businesses?
SIGNIFICANCE OF THE STUDY
The federal government will benefit from this study since it will educate them on the need of a free and stable economic environment. Also, the economic risks that may arise as a result of an increase in fuel prices. This research will also be used by the general public, students, and academics as a source of information or academic content.
SCOPE OF THE STUDY
The impact of increased fuel prices on Nigerian business operations is discussed in this paper. This research, on the other hand, is limited to the Gourmet Pizza Company in Abuja.
LIMITATION OF THE STUDY
DEFINITION OF TERMS
Any material that may be made to react with other substances to release energy as heat energy or to be used for work is referred to as a fuel. The notion was first applied to materials that could release chemical energy, but it has subsequently been expanded to include other types of heat energy, such as nuclear energy.
A price is the amount of money paid or compensated by one party to another in exchange for a single unit of goods or services. Production expenses, supply of the desired item, and demand for the product all influence the price.
Subsidy: A subsidy, sometimes known as a government incentive, is a type of financial help or support given to an economic sector with the goal of increasing productivity.
Organizations that seek profit by delivering goods or services in exchange for money are referred to as businesses. To be deemed a business, however, a company does not have to make a profit. In and of itself, the pursuit of profit qualifies an entity as a business.
Business operations are the actions that businesses participate in on a daily basis in order to grow the enterprise’s value and profit. The operations can be optimized to create enough money to pay expenses while also earning a profit for the business’s owners. Employees assist in the achievement of the company’s objectives by doing tasks such as marketing, bookkeeping, manufacturing, and so on.
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