THE EFFECTS OF SUBSIDY REMOVAL ON EFFECTIVE MARKETING OF PETROL IN NIGERIA
ABSTRACT
Generators powered by subsidized gasoline are almost universally used to power homes and businesses. It is clear that cutting back on subsidies will make things worse for the nation and raise inflation. In light of the elimination above, this article examines Enugu as a case study for Nigerian petroleum marketing. Both primary and secondary data were employed in the process of conducting this study; primary data concerned personal observations, interviews, etc., while secondary data involved the use of textbooks, the internet, journals, magazines, etc. Marketers, users, and distributors of gasoline goods make up the population. comprising 150 responses. The Taro Yaamni formula was used to calculate the sample size, and the chi-square test was used to verify the hypothesis. It was declared successful and advised Private investors and business owners should be permitted full engagement in the sector as a result of the fact that fuel subsidies have an impact on marketers, which will result in the product’s distribution being done effectively.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
With the switch from military to civilian government in 1999, the topic of subsidizing and subsidy removal has been widely discussed. Nonetheless, the withdrawal of subsidies appears to have caused the most outrage. The oil or fuel subsidy is another significant industry that has constantly been impacted. This can be explained by two factors. One is the continuing importance of oil to Nigeria’s economy. Second, a sizable portion of government funds are used to subsidize oil.
Yet, the elimination of the fuel subsidy over the years has been gradual—until early in January 2012, when the government began what was purported to be a drastic withdrawal of the subsidy. (N85 to N120 and later reduced to N97). Whether the removal was partial or not, the issue raised was that the timing was wrong i.e. January, there was no ‘safety net’ put in place before its removal, those responsible for the diversion of the subsidy money should be brought to book instead of the removal amongst other issues. Again, the government that the removal was to allow the free hands of demand and supply to determine market prices so as to restore efficiency in the production, refining, distribution and ultimately force price of fuel down just like in telecommunication industry.
On the other hand, as the debate continued little attention was paid to the impact of such removal would have on the balance of payment of Nigeria which is the long run effect.
In a government circular of 13th November, 1980 from petroleum inspectorate Lagos to the Chief Engineer NNPC Port-Harcourt. It was started you may recall that government indicated about two (2) years ago to encourage Nigerians to participate in the distribution and marketing of petroleum products.
In order to this goal, the commercial section of NNPC has approved roughly 260 260 Nigerians as independent marketers. After further research, he discovered that a total of persons in Nigeria have been granted permission (provision) to work as independent marketers (491).
1.2 STATEMENT OF PROBLEM
The provision of “cheap” petroleum products has been designed through time to be the center of the Nigerian economy. Petrol and kerosene, two subsidized byproducts of crude oil, are essential for domestic and commercial use in the average Nigerian household. This dependence is made worse by the fact that the PHCN’s public energy supply is epileptic. Generators that are fuelled by subsidized gasoline are used to power almost all homes and businesses. The tiny number of enterprises that depend on subsidized gasoline include hotels, barbershops, welders, hairdressers, pepper salesmen, proprietors of cold rooms, food vendors, private and public hospitals, etc.
Transportation costs for instance have gone up and this will result in spiral effect on other sectors- all other businesses in fact revolve around the transport sector. It is very obvious that subsidy removal will worsen the country’s already inflation rate. In fact it w ill result in hyper inflation as prices of goods and services are bound to skyrocket beyond the reach of many. Even the Naira will not be spared, because it will further depreciate in value as much money will be chasing fewer goods. Creditors also lose during inflation because if they lend out money when there is no inflation and the prices are moderate or stable, the moment inflation sets in the value of that money to the creditor is lost.
For oil marketers, who are paid the difference between international product prices and the subsidised price of domestic fuel (N 65/litre), there is an incentive to import even more product when prices are high. In recent years, balance-of-payments and fiscal strains have been evident Also, it appeared that the marketing of petroleum goods in the nation was not performing its duty particularly successfully on the part of the marketers. Very few profits are being made by independent marketers, as is the case with oil prices, as previously indicated by the federal government, improper distribution and refining expenses for petroleum products, as well as a decrease in the allotment of crude oil.
1.3 OBJECTIVES OF THE STUDY
The study’s objectives are the potential answers, aims, and deadlines that the research’s execution is meant to meet.
(1) To determine why the elimination of subsidies has caused issues with the marketing of petroleum products in Nigeria.
(2) To learn about the methods used to guarantee a long-term resolution to the issues.
(3) To be aware of the policies being implemented to address Nigeria’s petroleum product marketing issues.
(4)To ascertain whether fuel subsidies assist in making petroleum goods accessible to moderate the impact of actual market prices on the overall populace.
(5) To offer a better recommendation on the subject at hand.
1.4 RESEARCH QUESTIONS
The research question are associate with this research:
1. Do you think markets encountered problems in petroleum marketing as a result of fuel subsidy removal.
2. What strategies should marketers adopt?
3. Should government graft a policy regarding marketing of the petroleum?
4. Do you think removal of fuel subsidy help in making petroleum to all sector of the economy?
1.5 RESEARCH HYPOTHESIS
H0: Marketer encountered much problems in marketing of petroleum products because of removal of subsidy
H1: Marketer encountered do not problems in marketing of petroleum products because of removal of subsidy.
H0; Removal of fuel subsidy helps in fight the scarcity of petroleum
H0; Removal of fuel subsidy do not help in fight the scarcity of petroleum
1.6 SIGNIFICANCE OF THE STUDY
More information on what’s going on is needed! One tactic our military commanders used to keep us in check and stifle our economy and prevent us from participating in the emerging global economy was the fuel subsidy. A portion of the population hates competition and merit, therefore they supported it, which decreased the value of the Naira and reduced the number of Nigerians who are accepted in international trade to 419. But, you must be competitive if you want to remain relevant in the global economy. Subsidy is a front, a smokescreen for corruption by those who are uneducated and seek to reign over the learned.
It gives them the room to bunker fuel and refine in foreign countries giving away Nigerian jobs and selling currency at the black market to rule Nigeria while poverty and unemployment reign. We cannot continue to pick crumbs in a table richly laid for us by God. We must learn not to depend on such bait of Boko Haram or we would be subsidizing our slow demise in the hands of an un-Godly set of people. Therefore, this research work would go a run way to education Nigeria on why they should bear and admit the removal of subsidy. It will also help to know why they should have their own refries in the country instead private refries. On the part of marketers, they would admit also excess gain on their individual refries would rather disrupt the economic growth and development of the country. The research shall be relevant to marketing student in general in market research on similar topic.
1.7 SCOPE OF THE STUDY
The scope of this study is problems fuel subsidy removal and marketing of petroleum. As a result, the study is restricted to the Eastern parts of the country such as Enugu.
1.8 DEFINITION OF TERMS
Subsidy: A sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service
Independent marketers:- These are the group of Nigerians given license by NNPC to operate petroleum business in the country.
Existing oil marketers:- The eight major oil companies engaged in oil retailing in the country before the appointment of the independent marketers.
There are – National, Mobil, Texaco, Total, Agip, African, Petroleum, Eif and Unipetrol.
Petroleum products:- petroleum refers to fuel embracing components. They are:-
Premium motor spirits (pms) called super
Automatic Gas oil (AGO) called Diesel
Dual purpose kerosene (Dpk) called kerosene
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