CHAPTER ONE
INTRODUCTION
1.1 Background of Study
Protest are being held all over the world against politicians in the financial sector for wrecking economics in Nigeria, the fuel subsidy not backed by genuine agenda to enhance business development is the source of grave concerns even among the proponents of free market reforms (Sagagi, 2011). Since the mid 1980s various forms of structural reforms have been introduced with the hope of diversifying the economy and improving living conditions.
Half a decade ago, the nation pledged to implement development programme in line with the global strategy for cutting poverty by half worldwide. The dept overhang was used to justify the government inability to fund development projects. On June 30, 2005, Nigerians celebrated the dept relief deal. In the package, $19, 293, 207, 575 was wiped out for the Nigeria’s debts profile.
However, in 2010 Global monitor Report (GMR) of UNESCO revealed that about 92% of Nigerians still live on less than $2 a day while about 71% survive somehow on less than $1 a day. UNESCO in 2010 concludes that Nigeria still far away from attaining its commitment on global economic target (Sagagi, 2011).
The MDG report Nigeria (2010) equally lamented that no goal is certain to be achieved.
The present deregulation agenda with removal of fuel subsidy is part of what is contained in the petroleum industry Bill (PIB) and the medium term Expenditure framework and fiscal strategy paper 2011/2013.
The fuel subsidy is estimated to cost the Nigerian government about U.S.A $6 Billion per year. Although the amount is shrouded in secretary as the administrator of the scheme, Nigeria’s State Oil giant (The NNPC) account directly to the president via the minister of petroleum. Nigerian Parliamentarian argue that the secrecy and lack of transparency surrounding the actual amount and administration of the subsidy means that the amount branded about by the government could be less or far more than the U.S $6Billion per annum.
The medium Term Expenditure Frame work and fiscal strategy paper (2011-2013) undertake to promote fiscal discipline, prudence in the public expenditure, ensure macro economy stability, stabilizes exchange rate and inflation. It is expected that the private sector will be stimulated to enhance business development, create new job thereby lessening economic hardship. This is to the paper will pave way for enhancing vision 2020, MDGs and others.
It is interesting to note that Nigeria is being rated as the Africa’s second largest producer of crude oil after Libya, eightieth largest exporter in the whole word and the tenth largest exporter in the whole world and the tenth largest oil reserves (Omotoso, 2012:2). But this situation does not prevent Nigerians from getting worried over the fact that they are yet to have positive impact of the huge revenues that are realize since the inception of production and exportation of oil in the country. It has been wide protest of various degrees from different quarters against short supply and steady increase in the pump prices of refined products.
Sequel to the ugly situation, the Federal government had to come up with the policy of fuel subsidy, with the aim of reducing the prices of products, thereby minimizing the direct burden on the masses. The introduction of this policy brought down of huge expenses on the part of the Federal government. This is evident on the sum of above 2.5 billion naira spent on fuel subsidy alone between 2006 and 2009, and 600 billion naira budgeted for the fiscal year 2010 (movement for economic Emancipation 2010:10)
The executive arm of the federal government has taken the view that fuel subsidy removal is an important element in the larger scheme to accelerate Nigeria’s business development. The fraction of the price that consumers are supposed to pay to enjoy the use of petroleum products is paid by government so as to ease the price burden. The Nigerian government removed part of this subsidy claiming that the prices paid by Nigerians to use petroleum products are less than what they should pay particularly when benchmarked against the prices in the international market and will provide necessary impetus for Nigerian economy to find its rhythm (Komolafe, 2011).
The Nigerian government has removed part of the subsidy but proposes to remove all subsidies on fuel arguing that such subsidy removal savings can be better invested to refineries, road and major infrastructure projects which in the long term will ensure sustainable business development and wealth generation for her citizens (center for public policy Alternatives, 2012).
1.2 Purpose of the Study
The purpose of this study is to investigate the impact of fuel subsidy removal on the Nigerian business units taking Uvwie Local Government Area of Delta State as a case study.
It is therefore interested in finding out:
• If fuel subsidy have a positive or negative impact on the Nigeria masses
• If removal of fuel subsidy will lead to more development.
• If fuel subsidy removal has effect on job creations.
• If fuel subsidy has effect on Nigeria, the total population and sample of this study and also the cost of transportation. However, this limitation will not anyway hinder the correctness or usefulness of the findings of this research work.
1.3 Statement of Problem
Nigeria is a young democracy with 14 years history of successful democratic regime change after more than 30 years of military rule interrupted by five years of civilian rule.
Transparency international ranks Nigeria 134 out of 178 and by most accounts is perceived as a corrupt poorly governed state. The population suffers an increasing level of poverty and growing inequality. Politically the country continues to experience simmering pockets of insurgency in the Niger Delta and militant violence from Islamic fundamentalists in the Northern parts.
Nigeria is the World’s 14th largest producer of index mundi with 10th largest proven resources crude oils. It possesses the world’s 8th largest proven natural gas reserved. The country has 4 refineries with an installed production capacity of 445,000 barrels per day, adequate to meet its domestic need with a surplus for exporter. Yet the country is a large net importer of gasoline and other petroleum products. Some cabals within the petroleum industry have continued to benefit from the accruals of the petroleum at the expenses of the ordinary citizens of the country. This has resulted to the depression of Nigeria’s international financial market, still hung over from the 2008 global economic meltdown. Nigeria’s foreign exchange rate continues to show business units.
1.4 Research Questions
To carry out this study, the following research questions were raised:
• Does subsidy affect the masses in the Nigerian society positively or negatively?
• Will removal of fuel subsidy lead to more development?
• Will subsidy removal lead to job creations?
• Does fuel subsidy have effect on the Nigerian business units?
1.5 Significance of the Study
The issue and problem of complete removal of fuel subsidy is one of the major challenges that face us in recent times. Therefore the findings from this federal, work will be of importance to the federal state and local government and also to the fuel subsidy committee and other parastatals indirectly involved. It will help them not only to make a wise decision but also to be able to predict the effect of the total removal of fuel subsidy on the Nigeria masses, on job creation and the Nigeria business units.
1.6 Scope and Delimitation of the Study
This study is to be restricted to Uvwie Local Government Area of Delta State. The subjects from this study will be drawn from adults of all works of life in Uvwie Local Government, owners of business (entrepreneurs) and small medium scale business owners in Uvwie Local Government Area of Delta State.
INTRODUCTION
1.1 Background of Study
Protest are being held all over the world against politicians in the financial sector for wrecking economics in Nigeria, the fuel subsidy not backed by genuine agenda to enhance business development is the source of grave concerns even among the proponents of free market reforms (Sagagi, 2011). Since the mid 1980s various forms of structural reforms have been introduced with the hope of diversifying the economy and improving living conditions.
Half a decade ago, the nation pledged to implement development programme in line with the global strategy for cutting poverty by half worldwide. The dept overhang was used to justify the government inability to fund development projects. On June 30, 2005, Nigerians celebrated the dept relief deal. In the package, $19, 293, 207, 575 was wiped out for the Nigeria’s debts profile.
However, in 2010 Global monitor Report (GMR) of UNESCO revealed that about 92% of Nigerians still live on less than $2 a day while about 71% survive somehow on less than $1 a day. UNESCO in 2010 concludes that Nigeria still far away from attaining its commitment on global economic target (Sagagi, 2011).
The MDG report Nigeria (2010) equally lamented that no goal is certain to be achieved.
The present deregulation agenda with removal of fuel subsidy is part of what is contained in the petroleum industry Bill (PIB) and the medium term Expenditure framework and fiscal strategy paper 2011/2013.
The fuel subsidy is estimated to cost the Nigerian government about U.S.A $6 Billion per year. Although the amount is shrouded in secretary as the administrator of the scheme, Nigeria’s State Oil giant (The NNPC) account directly to the president via the minister of petroleum. Nigerian Parliamentarian argue that the secrecy and lack of transparency surrounding the actual amount and administration of the subsidy means that the amount branded about by the government could be less or far more than the U.S $6Billion per annum.
The medium Term Expenditure Frame work and fiscal strategy paper (2011-2013) undertake to promote fiscal discipline, prudence in the public expenditure, ensure macro economy stability, stabilizes exchange rate and inflation. It is expected that the private sector will be stimulated to enhance business development, create new job thereby lessening economic hardship. This is to the paper will pave way for enhancing vision 2020, MDGs and others.
It is interesting to note that Nigeria is being rated as the Africa’s second largest producer of crude oil after Libya, eightieth largest exporter in the whole word and the tenth largest exporter in the whole world and the tenth largest oil reserves (Omotoso, 2012:2). But this situation does not prevent Nigerians from getting worried over the fact that they are yet to have positive impact of the huge revenues that are realize since the inception of production and exportation of oil in the country. It has been wide protest of various degrees from different quarters against short supply and steady increase in the pump prices of refined products.
Sequel to the ugly situation, the Federal government had to come up with the policy of fuel subsidy, with the aim of reducing the prices of products, thereby minimizing the direct burden on the masses. The introduction of this policy brought down of huge expenses on the part of the Federal government. This is evident on the sum of above 2.5 billion naira spent on fuel subsidy alone between 2006 and 2009, and 600 billion naira budgeted for the fiscal year 2010 (movement for economic Emancipation 2010:10)
The executive arm of the federal government has taken the view that fuel subsidy removal is an important element in the larger scheme to accelerate Nigeria’s business development. The fraction of the price that consumers are supposed to pay to enjoy the use of petroleum products is paid by government so as to ease the price burden. The Nigerian government removed part of this subsidy claiming that the prices paid by Nigerians to use petroleum products are less than what they should pay particularly when benchmarked against the prices in the international market and will provide necessary impetus for Nigerian economy to find its rhythm (Komolafe, 2011).
The Nigerian government has removed part of the subsidy but proposes to remove all subsidies on fuel arguing that such subsidy removal savings can be better invested to refineries, road and major infrastructure projects which in the long term will ensure sustainable business development and wealth generation for her citizens (center for public policy Alternatives, 2012).
1.2 Purpose of the Study
The purpose of this study is to investigate the impact of fuel subsidy removal on the Nigerian business units taking Uvwie Local Government Area of Delta State as a case study.
It is therefore interested in finding out:
• If fuel subsidy have a positive or negative impact on the Nigeria masses
• If removal of fuel subsidy will lead to more development.
• If fuel subsidy removal has effect on job creations.
• If fuel subsidy has effect on Nigeria, the total population and sample of this study and also the cost of transportation. However, this limitation will not anyway hinder the correctness or usefulness of the findings of this research work.
1.3 Statement of Problem
Nigeria is a young democracy with 14 years history of successful democratic regime change after more than 30 years of military rule interrupted by five years of civilian rule.
Transparency international ranks Nigeria 134 out of 178 and by most accounts is perceived as a corrupt poorly governed state. The population suffers an increasing level of poverty and growing inequality. Politically the country continues to experience simmering pockets of insurgency in the Niger Delta and militant violence from Islamic fundamentalists in the Northern parts.
Nigeria is the World’s 14th largest producer of index mundi with 10th largest proven resources crude oils. It possesses the world’s 8th largest proven natural gas reserved. The country has 4 refineries with an installed production capacity of 445,000 barrels per day, adequate to meet its domestic need with a surplus for exporter. Yet the country is a large net importer of gasoline and other petroleum products. Some cabals within the petroleum industry have continued to benefit from the accruals of the petroleum at the expenses of the ordinary citizens of the country. This has resulted to the depression of Nigeria’s international financial market, still hung over from the 2008 global economic meltdown. Nigeria’s foreign exchange rate continues to show business units.
1.4 Research Questions
To carry out this study, the following research questions were raised:
• Does subsidy affect the masses in the Nigerian society positively or negatively?
• Will removal of fuel subsidy lead to more development?
• Will subsidy removal lead to job creations?
• Does fuel subsidy have effect on the Nigerian business units?
1.5 Significance of the Study
The issue and problem of complete removal of fuel subsidy is one of the major challenges that face us in recent times. Therefore the findings from this federal, work will be of importance to the federal state and local government and also to the fuel subsidy committee and other parastatals indirectly involved. It will help them not only to make a wise decision but also to be able to predict the effect of the total removal of fuel subsidy on the Nigeria masses, on job creation and the Nigeria business units.
1.6 Scope and Delimitation of the Study
This study is to be restricted to Uvwie Local Government Area of Delta State. The subjects from this study will be drawn from adults of all works of life in Uvwie Local Government, owners of business (entrepreneurs) and small medium scale business owners in Uvwie Local Government Area of Delta State.
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