THE ECONOMIC EFFECT OF PETROLEUM SCARCITY IN NIGERIA (A CASE STUDY OF ENUGU STATE. )

CHAPTER ONE

INTRODUCTION

       Oil exploration in Nigeria could be traced back to 1908 when a German company [Nigerian bitumen corporation started chilling of cretaceous sands of Niger  Delta. Shell Darchy , the pioneer oil exploration and producing company was incorporated and granted concession  right to prospect for oil in 1936.production and export of crude oil took effect in 1959 at a rate of 5100 barrels per day.

    The success of shell spurred many other multinational oil company to join in the scumble  for Nigeria crude oil. Among these were MOBIL, NIGERIA AGIP OL COMPANY , NIGERIA GULF OIL COMPANY SATRAP [ NOW ELF].others are TEXACO,PAN OCEAN, PHILP OIL ESSO AAND ASHLAND.

       Major activities of these oil companies are centered in Delta , Rivers , Cross Rivers , and Imo state .

 These include the off shore and on shore  locations. Some of the on shore fields which produce most Nigeria crude oil are located at Bonu, Obigbo north , and east , elenwa ,umuechem, in rivers state , oguta and izombe in Imo state . off shore are located in aqua- Ibom in cross rivers rennington , forcados and escravos in Delta  state.

    The Nigeria economy can largely be described as one with a strong petroleum industry superimposed over an underdeveloped industrial base. Presently Nigeria is growing into a more economic country by depending Marjory on oil revenue. The dominance of oil in the Nigeria economy because a reality after the resumption of oil production at the end of the civil war, [1967-1970] it virtually because predominant after the fuel price increase of 1973 /74. Most recently is the one about to struck the nation now , take from Daily Champion News Paper. Monday march 17, 2003, “fuel price        like :NLC threatens showdown with  FG” was the capital. I wounded were we are leading to, I wounded if the federal government understands that the comfort of new citizen is the price of a government revenue of about 90% of the federal government revenue.

     Fuel scarcity that struck the nation in recent times appears to be continuing without end. Disturbing as the picture might be the situation on the ground shows that a petroleum endowed nation which is one world’s major producers and a member of the organization of petroleum exporting countries [OPEC] with a daily quota of 1.865 million barrels and also one whose four vetira have combined production of 445,000 barrels per day is in the throes of a domestic oil shortage. Petroleum scarcity is usually characterized by the emergency of long queue of vehicle queue for about four days to obtain fuel at exorbitant price. Taking a critical view of this problem one would discover that ‘there is a long list of players from the supply of petroleum product through the refineries to the end users. Some of the participant in this chain of distribution have acquired the role of middlemen adults. Mr Chamberlin  oyibo , the managing director of the Nigeria National Petroleum Corporation [NNPC].

      These middlemen operate from a sewing lack of control. The cause of petroleum scarcity could be trace to a complex process where many people and actions contribute, from crude oil through refining to the PPMC [pipeline and product market company ] the tanker drivers and owners. Independent marketers , retailers and consumers all collectively contribute knowingly or unknowingly to petroleum scarcity by their acts of omission or commission.

       This ugly development in which roadside peddlers have abundance of petrol while the filling stations are empty also cries for critical attention

 

1.1  STATEMENT OF PROBLEM

This research work is motivated by an interest in finding a solution to the unending fuel scarcity in our filling stations. This fear of petroleum scarcity  ought not to exist in our oil producing country with massive investment in four petroleum refineries [Wari, Port Harcourt , kaduna , and Elema]. It is puzzling and tragic that the country’s major source of income has become the harbinger of incoherence to the citizens.

However the problem  is to find out the extent to which fuel shortage has affected the entire economy. What are the option left for the government in solving the problems left?. How has it affected the common man in the street.

In view of these complexities government needs to consider with utmost urgency. Other arrangement for managing it’s oil sector efficiency as a catalyst for national development rather than a source for easy money and personal interest. It is quite obvious from what we see day to day about the random rise of fuel price. If I may say the problem is highly affecting the massive in their economic life’s.

The essence of good government is the interest of the masses which fuel scarcity has turned up-side down .

 

1.2            OBJECTIVES OF THE STUDY

This study has the following objectives:

-                     To find out the causes of fuel scarcity

-                     To recommend what can be done to solve the problem of fuel scarcity.

-                     To find out how the fuel scarcity has affected the business men and women civil servant etc. (the total population of Enugu metropolis).

 

1.2  SIGNIFICANCE OF THE STUDY

This study will check -:

  1. Effects of fuel scarcity in transportation
  2. Unemployment
  3. Agriculture
  4. Oil revenue

Recently the [NLC] National Labour Congress threatens show down with the federal government over fuel price like, [daily champion march 17] the fuel scarcity has gone a long way affecting every expect of our economy.

Talk about transportation a part of economic sector has increase that many people as usual , some resort to walking to the office which will take a long time and will affect their ability to work. The problem of fuel scarcity  is practical.

Fuel scarcity has as well created unemployment when there is acure , scarcity , must energy source industries would close down , thereby throwing a lot of workers to the unemployment market. This will also affect the road transport workers and their drivers ,which eventually led to serious disorder. Demand for oil is a derived demand. Motor spirit for example is demanded chiefly for the service it renders in the engine. Because of the importance of oil in our economic life. It’s shortage has brought untold hardship and powerful effect on labour force.

An economy in cries of low capacity utilization might lay off workers and in the long run increase unemployment.

Agriculture which is one of the most vital requirement for existence of man was adversely affected by the scarcity of petrol products. Production is not complete until it gets to the final consumer. During the period of scarcity farmer found it hard to covered their farm product to market which resulted to a large loss as most of adequate preservative method and lack of warehouse , this development was not unconnected with the exorbitant cost of transportation which emanated from the scarcity of fuel .

Oil revenue the federal government lost about 150million dollars [about #3.3million] from oil export during the NUPENG/PENGASSON strike in July and August 1994. This show that petroleum scarcity has really done much to our economy. This shortage still happens almost every time there is fuel shortage of strike. It is no gainsaying that oil is the main stay of Nigeria economy  hence an acute shortage is bound to ground the economy. As a result there has been a considerable fall on the accruing to Nigeria which will definitely lead o budget deficit. Project stated for completion may not get government support since the government would be battling it’s balance  of payment deficit.

 

1.4              STATEMENT OF HYPOTHESES

Ho:    The middle men have not been contributing to fuel scarcity.

Hi:     The middle men have been contributing to fuel scarcity

Ho:    Fuel scarcity is not the cause of high cost of transportation

Hi:     Fuel scarcity is the cause of high cost of transportation

 

1.5     SIGNIFICANCE OF THE STUDY

          This study will be of great benefit to the Nigeria National Petroleum Company (NNPC) who is not the sole cause of fuel scarcity.  This study will help them to find out those people or those things that contribute to fuel scarcity and take drastic measure to combat them.

          This study or research will be of immense benefit to the government because if there is fuel scarcity, it then means that crude oil is also insufficient by this; the government will not have enough oil to transport in order to get foreign exchange.

          This study will also be of great benefit to car owners and businesses because if the fuel scarcity is rectified and resolved all business will start improving and progressing.

          From this study, the rural drivers will find it easy to transport their farm product from the rural area to urban zones because the cost fuel will be on a lower side.

          Also from those research work, it will be kind of encouragement.  In that when the cost fuel is low, the cost of transportation will be also low, and these can lead also to low price of commodity been transported.

1.6            SCOPE OF THE STUDY

This study is carried out in Enugu metropolis to study the operation of the Nigerian national petroleum Company (NNPC) and the middlemen.  The study is only based on petrol alone and not for kerosene or gas- generally.

 

1.7            LIMITATION OF STUDY

The research work is limited to fuel scarcity in Nigeria with a case study of Enugu metropolis.  This study was carried out purely as an academic exercise and therefore could neither receive any financial support form the government or any private enterprise.  The limited financial resources of the researcher is thus a major handicap and thereby resulted in limiting the study only to Enugu metropolis. Time factor also proved a major constraint.

 

1.8              DEFINITION OF TERMS

Economic    -        Punishment of another country by reducing or stopping                               trade with it.

Effect          -        Change produced by a action or cause

Fuel            -        Mineral resources that provide nuclear or internal energy                               requirement.

Scarcity      -        Something not been enough, that is difficult to obtain and                                 much less then is needed.

Depot         -        A place where fuel or oil is being store. Or A warehouse                                of anything.

Middlemen -        Trader who passes goods form the producers or form                                place where they are produce to the final consumer or                                final buyer.

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