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THE EFFECT OF 2021 FUEL PRICE HIKE ON TRANSPORTATION SYSTEM IN NIGERIA (A CASE STUDY OF ASCENT TRANSPORT COMPANY (ATM), ABUJA) | Get Project Topics
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THE EFFECT OF 2021 FUEL PRICE HIKE ON TRANSPORTATION SYSTEM IN NIGERIA (A CASE STUDY OF ASCENT TRANSPORT COMPANY (ATM), ABUJA)

CHAPTER ONE

INTRODUCTION

Background of the study

The logistics business is frequently affected by price fluctuations in the gasoline market. Rapid increases in fuel prices can have a long-term and disastrous impact on freight management organizations, while a sudden drop could result in short-term profit boosts and a surge of competition in the market to supply consumers with the best deal.

The transportation sector, which plays a large role in daily activities and the economy, is one of the major components of globalization. During the twentieth century, the scope of trade shifted from local to global, and the freight transportation system evolved into a global network. Freight transportation, in particular, is one of the most significant economic operations. Freight transport has been growing at a faster rate than passenger transit, and this trend is projected to continue (Ribeiro et al, 2007). The three most frequent modes of transport for moving containers are truck, rail, and ship, each with its own set of pros and cons. The cost of transportation is an important selection criterion among the many factors that go into determining the best route of freight transportation. The main source of today’s transportation costs is the price of oil. Most types of freight transportation are still reliant on expensive and finite fossil fuels, mostly diesel fuel (Russell et al, 2014). The price of crude oil is the single most important factor affecting the retail price of diesel fuel (Noordin et al.). Crude oil, as an energy supply, is a critical factor in determining the state of the global economy (McSweeney et al, 2008). Its price variations have a direct or indirect impact on all industrial sectors, including finance, energy, retailing, and transportation. The impact of oil prices on the transportation sector is determined by three factors: the relevance of oil prices on the cost of energy used for each mode of transportation, the extent to which oil prices are transferred to transport fuel prices, and the relative weight of energy costs on total operating costs for each mode (Casamassima et al, 2009). Fuel prices are a direct expense to consumers and a cost to transportation sectors.

Because the sensitivity of transportation operating costs to changes in oil prices varies greatly among shipment modes, the price of oil has become a crucial consideration in freight mode selection. According to Casamassima et al. Noordin et al. (2009), the sensitivity of road and railway fuel costs to crude oil price was 40%, but maritime fuel costs were 100% because marine fuels are tax-free. Furthermore, they calculated that a doubling of crude oil prices would have a 10% impact on road and rail freight transport costs, and a 50% impact on maritime freight transport costs.

Carriers are compelled to hike prices or suffer losses as the cost of fuel rises. The cost of fuel, in turn, affects not just the logistics company, but also the shipper.

Statement of the problem

On Thursday, March 11th, 2021, the Petroleum Products Pricing Regulatory Agency (PPPRA) stated that the Nigerian government had hiked the pump price of gasoline to N212.61 per litre. The landing cost is N189.61 per litre, according to the agency, while fuel depot owners would sell to marketers for N206.42 (Premium Times reports).

This announcement comes days after Nigerians suspected a fuel price hike because depot owners were reportedly hoarding the product and raising prices in anticipation of a government fuel price increase, despite the NNPC responding to the speculations with a statement from its Group General Manager, Group Public Affairs Division, Kennie Obateru.

Other essential needs of Nigerians, such as transportation and the cost of products and services, are likely to rise in price as the price of petroleum rises, making it more difficult for the typical citizen to purchase food and other basic needs, especially if their income does not rise.

Nigerians have protested the decision on social media using the hashtag #FuelPriceHike, with some people asking for a rally in Ojota, Lagos State. Many Nigerians have been protesting on social media that Nigeria no longer uses coins, and that with the hike in fuel prices to N212.61 per litre, how would they be able to get their balance while buying petrol?

Objective of the study

The major goal of this research is to look into the impact of rising gasoline prices on Nigeria’s transportation system, using Ascent Transport Company (ATM) in Abuja as a case study. The study’s objectives were to:

Examine the impact of the increase in fuel prices on ATM passengers in Abuja.

Examine the impact of rising fuel prices on ATM Abuja’s profitability.

Research Questions

1. How has the increase in fuel prices affected ATM Abuja passengers?

2. What impact has the increase in fuel prices had on ATM Abuja’s profitability?

Research hypotheses

In this investigation, the following null hypothesis will be tested:

  1. The increase in fuel prices has had no impact on ATM passengers in Abuja.
  2. The increase in fuel prices has had little impact on ATM’s profitability in Abuja

Significance of the study

The government of Nigeria would be able to recognize the necessity to put in place measures to subsidize fuel in the country and avoid unwarranted price hikes as a result of this study. This research will also assist transportation companies in developing a sound strategy and mechanism for addressing fuel price increases in the foreseeable future. This research will also serve as a reminder to the general population that whenever there is a gasoline price increase in the country, transportation becomes more expensive. This research will also be used as a foundation for future research in this or similar fields.

Scope of the study

The purpose of this study is to look into the impact of increased gasoline prices on ATM passengers in Abuja. This research will also look into the impact of rising fuel prices on ATM Abuja’s profitability. Only ATM Abuja employees will be included in this study.

Limitation of the study

Finance, time, and suitable materials were the key obstacles that the researcher faced while conducting this investigation.

Definition of terms

An effect is a change that occurs as a result of an activity or other cause.

A sudden or considerable increase in prices, rates, taxes, or quantities is referred to as a price hike.

The movement of people, animals, and products from one location to another is referred to as transportation.

References

Climate Change (2007): Mitigation, Ribeiro, S. K., Kobayashi, S., Beuthe, M., Gasca, J., Greene, D., Lee, D., et al. Working Group III’s contribution to the Intergovernmental Panel on Climate Change’s Fourth Assessment Report. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA, 2007. In Transport and its Infrastructure, ed. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA, 2007.

D. Russell, J. J. Coyle, K. Ruamsook, A. Evelyn High Transportation Costs Have a Real Effect. Quarter 1 of Supply Chain Quarterly (2014). http://www.tandf.co.uk/journals/authors/style/reference/tf APA.pdf was retrieved from http://www.tandf.co.uk/journals/authors/style/reference/tf APA.pdf.

Oil Price Shock and Malaysian Sectoral Stock Market Return, Noordin, N. S. S. University of Malaya doctoral dissertation (2009). http://repository.um.edu/my/889/1/Syahira%20-%20MBA.pdf was retrieved from http://repository.um.edu/my/889/1/Syahira%20-%20MBA.pdf.

Factors Affecting Diesel Prices, US Energy Information Administration (2017). http://www.eia.gov/energy explained/index.cfm?page=diesel factors affecting prices

A Comparative Analysis of Oil as a Risk Factor in Australian Industry Stock Returns, 1980-2006′ (2008), Studies in Economics and Finance, Vol. 25, pp.131-145. McSweeney, E. J., and Worthington, A. C., ‘A Comparative Analysis of Oil as a Risk Factor in Australian Industry Stock Returns, 1980-2006’ (2008), Studies in Economics and Finance, Vol. 25, pp.131-145.

The Impact of Oil Price Fluctuations on Transportation and Related Sectors, Casamassima, G., Fiorello, D., and Martino, A. The European Parliament is an institution of the European Union (2009). 9b332d0-6bd2-4999-8fd6-6f939ab7d1f7 retrieved from http://publications.europa.eu/resource/cellar/5 9b332d0-6bd2-4999-8fd6-6f939ab7d1f7 retrieved from http://publications.europa.eu/resource/cellar/5 9b332d0-6bd2-4999-8fd6-6f939ab7d

Impact of High Oil Prices on Freight Transportation: Modal Shift Potential in Five Corridors, Transportation Economics and Management Systems (TEMS) Inc. (2008). https://www.marad.dot.gov/wp-content/uploads/pdf/Modal Shift Study-Technical Report.pdf

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