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THE EFFECTS OF SUBSIDY REMOVAL ON EFFECTIVE MARKETING OF PETROL IN NIGERIA

ABSTRACT

Almost every home and business is powered by generator fired by subsidized petrol. It is very obvious that subsidy removal will worsen the country’s situation and worsen inflation. It is in the light of the above removal on the effective marketing of petrol in Nigeria using Enugu as the case study. In the course of carrying this research, the research used primary and secondary data, the primary data deals with personal observations, interview etc while secondary data contained the use of textbook, internet, journals, magazines, etc.  The population comprises marketer, consumers and distributor of petrol products.  Which is made of 100 respondents.  The sample size was determined using Taro Yaamni’s formular in which the hypothesis was tested using chi-square. It was concluded  and recommended that fuel subsidy affect marketers and therefore private investors and entrepreneurs should be allowed full participation in the sector be allowed full participation in the sector, a situation that will lead to effectiveness in the distribution of the product.

CHAPTER ONE

INTRODUCTION

1.1    BACKGROUND OF THE STUDY 

The issue of subsidizing and subsidy removal has been on the public domain since the transition from military rule to civilian rule in 1999. But the one that seems to have generated a lot of controversy is the issue of subsidy removal. And one major sector that has always affected is the oil or fuel subsidy. Two reasons can be adduced for this. One is the fact that oil remains the backbone of the Nigerian economy. And secondly, large chunk of government money go into oil subsidizing. However, the removal of fuel subsidy over the years has been a gradual one, until recently early this January, 2012 when the government embarked on a drastic removal of the subsidy – though it was claimed to be a partial one (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.

To this effect about 260 two hundred and sixty Nigerians have been given approval by the commercial division of NNPC as independent marketers. He then confirmed on investigation that the total number of the people given approval (provision) to operate as independent marketers in Nigerian is (491).

1.2    STATEMENT OF PROBLEM

The Nigerian economy over the years has been programmed to revolve around the supply of „cheap‟ petroleum product. An average household in Nigeria depends on subsidized by-products of crude oil such as petrol and kerosene for domestic and commercial use. This dependence is not helped either as public electricity supply from PHCN is epileptic. Almost every home and business is powered by generators fired by subsidized petrol. The few small scale businesses such as Hotels, Barbers, Welders, Hair dressers, Pepper sellers, Cool-room owners, Food sellers, Private and Government hospitals etc all rely on subsidized fuel. 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 on the parts of marketers marketing of petroleum products in the country appeared not to have profound its function very satisfactorily. Too much shortages of profit by the independent marketers and like in the oil prices as was stated by the federal government before now. Inappropriate refining and distribution costs of the petroleum products and reduction in the crude oil allocation.

1.3    OBJECTIVES OF THE STUDY          

The objectives of the study refers to the possible solution, goals, targets intended to be achieved by carrying out this research work these are.

(1)    To find out why there are problems in the marketing of petroleum products in Nigerian as a result of subsidy removal.

(2)    To find out the strategies adopted to ensure a lasting solution to the problems.

(3)    To Know the kind of polices being imposed on to solve this problems of marketing petroleum products within Nigerian.   

4.     To determine if fuel subsidy help in  making petroleum products available to cushion the effect of actual market prices of the products on the general populace.

5. To make some preferable recommendation  on the issue at stake.

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 reguarding 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

We need is more education on what is happening! The fuel subsidy is one way that our military leaders used to keep us down thereby distorting our economy and making us unable to key into the emergent global economy. A section of the country abhors competition and merit and so they sustained it thereby depressing Naira value and making Nigerians only 419 pariahs in global trade. But to be relevant in the global economy you must be competitive. Subsidy is a facade a smokescreen for inefficiency and corruption by the unenlightened who want to rule over the educated. 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 TREMS

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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