EFFECTS OF FUEL SUBSIDY ON THE ECONOMY OF NIGERIA

EFFECTS OF FUEL SUBSIDY ON THE ECONOMY OF NIGERIA: CHALLENGES AND PROSPECTS

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF STUDY

In brief, the term subsidy simply depict any measure that keeps prices consumers pay for a good or produce below market level for consumer or for producers. Subsidies take different forms, these include grants, tax reductions and exemptions or price controls. Others affect prices or cost indirectly such as regulations that skew the market price in favour of a particular fuel, government. Sponsored technology, or research and development. (R & O) Alozie (2009).

Given the antecedents that most Nigerians have not benefited from fuel subsidy. Several economists view subsidies as highly corrupt, wasteful and bled money from the treasury into the private pockets of rich fuel importers. As a result of this obvious reality.

The federal government on January 1st 2012 dramatically announced the end of fuel subsidy. With the intention of using the money accrued from fuel subsidy to develop other sectors of the economy, and also to ensure sustainable develop and wealth generation for the nation. Onanuga (2012). Therefore, this study aimed to examine the effects of fuel subsidy on the economy of Nigeria.

EFFECTS OF FUEL SUBSIDY ON THE ECONOMY OF NIGERIA

The removal of fuel subsidy by the nigeian government raises lot of dust. It can be said to be the most talked about issue since the inception of democracy in Nigeria. The stake holders, unions and people made snide comments about the removal of fuel subsidy. They say that the policy is unconstitutional because the policy does not favour the poor masses. Also, they did not seek the consent of the people and their full support before implementing such policy. They also stated their view saying that subsidy removal is not the only means that the government can accrue or save money to develop other sectors of the economy.

1.2     STATEMENT OF PROBLEM

The country has 4 refineries with an installed production capacity of 445,000 barrels of fuel per day, adequate to meet its domestic needs with a surplus for export. Yet the country is a large net importer of gasoline and other petroleum products.

Some cabals within the petroleum have continued to benefit from the accruals of the petroleum at the expense of the ordinary citizens of the country. This has resulted to the depression of Nigeria’s international financial markets, still hung over from the 2008 global economic meltdown. Nigeria’s foreign exchange rates continue to show weakness, naira posting a persistent slide against all major currencies. The effects of fuel subsidy on the economy of Nigeria.

The removal of fuel subsidy by the federal government also generated inflation in the country which bought about a high cost of fuel and other items in the market. However, not only did it bring about inflation, it was also accompanied with mass poverty. Because the price of goods and services increased while the income of people still remained constant.  It was these problems that prompted the researcher to carry a thorough research on the impact of fuel subsidy removal on the Nigerian economy. It is in view of these that the researcher is motivated to examine the effects of fuel subsidy removal and the Nigerian economy.

1.3     OBJECTIVES OF THE STUDY

The broad objective of this study is to examine the effects of fuel subsidy removal and the Nigerian economy

The following are the specific objectives of the study

1. To investigate the rational for the removal of fuel subsidy by the federal government.
2. To examine what petrol subsidy removal portend for the Nigerian economy.
3. To examine the extent of failure or success of the oil subsidy regime.

1.4     RESEARCH QUESTIONS

The following questions are raised to guide the research

1. To what extent is fuel subsidy useful to a majority of Nigerians.
2. Was the federal government reasonable in removing the subsidy on fuel.
3. What does the fuel subsidy removal portend for Nigerians.

1.5     SCOPE OF STUDY

Because of the vast nature of Nigeria, the researcher limited its study to Uyo local government area and its environs

1. 6 SIGNIFICANCE OF THE STUDY

The result of the study will also be useful to Nigerian citizens as they will comprehend and be enlightened on the use fullness or other wise of fuel subsidy removal. The finding will also be useful to students, staff and researchers looking for reference materials on fuel subsidy (removal). The public, private sectors and public affair analyst will learn a lot from the findings and recommendations made in this work

1.7     DEFINITION OF TERMS

IMPACT – consequences, outcome, reparations

FUEL SUBSIDY – The amount of money that the government pays to the cabals

or fuel importers while importing fuel so the price of fuel will be cheaper for the people to purchase

REMOVAL – Elimination, withdrawal or taking away

NIGERIAN ECONOMY – The wealth, resources financial system of Nigeria

SUBSIDY – Any measure that keep prices consumer pay for a good or  produce below market price for consumer or for producer

REGIME – A period of existence of something.

CONCLUSION

A majority of Nigerians accepted the fuel subsidy removal because they were not actually the ones benefiting from it. It was the hope of the masses that the government would use the money that accrued from the removal of subsidy on fuel to develop other sectors of the economy from which the masses could benefit.

The people agitated against the removal of subsidy on fuel not because they did not know its importance and what they would benefit from it in the long run, but because of the high level of mistrust they had in government and also the wrong timing and execution of the policy.

Since the fuel subsidy removal has come to stay, the people are now asking that the government should provide palliatives measures that would help cushion the adverse effects in the short run. In summary the removal of fuel subsidy will be good for Nigerians and if properly applied would go a long way in reviving and sustaining the other sectors of the economy.

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Ikemesit

Ikemesit Akpan is my name. I am a Nigerian author. I work with projectboss.com.ng. I’m a researcher and a writer of academic research.

ikemesitetukapan20233@gmail.com