Critical Analysis Of The Implication Of Fuel Hike On Food Production And Supply In Nigeria

CONCLUSION AND RECOMMENDATION

5.1    CONCLUSION

In this study, our focus was to carryout  a critical analysis of the implication of fuel hike on food production and supply in Nigeria. The study specifically was aimed at ascertaining if fuel price hike affects food production and supply in Nigeria.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 100 responses were validated from the enrolled participants where all respondent are residents in Lagos State.

Based on the findings, the paper concludes that the economical effects, without auguring for or against subsidy removal are negative. The Government of Nigeria would have to consider these effects now or deal with it In the near future.The growth of real GDP hasreduced because of the hike in the price of fuel in Nigeria. In addition, the rise in petrol price and the certainty of uneven prices across all 36 states of the federation, will add anywhere from 3 to 5 percentage points to consumer price inflation since 2012 to date 2014.Households’ income and spending have both been affected by the rise in petrol prices. More so the value of minimum wage compensation will depreciate further (assuming it is finally at N18, 000) combined with the increase in inflation. At the same time, the average household’s annual spending on energy goods and services will rise by about N75, 000, and their saving rate dropped sharply.The fall in the saving rate, will erode about half of Nigeria’s present middle-class citizens and further dampen the negative effects that higher prices would ordinarily have had on the economy in the short run. Consumer spending will be diminished greatly over the next few years, as citizens try to adjust and build up new savings.

Paying high prices for petrol and using less of it will affect the demand for goods and services. Nigeria is known more as a consuming nation than a producing nation. The few production industries In Nigeria will face a daunting challenge to stay in business (cost of production will go up and demand will drop).

The effects on demand, however, have by far the greater potential impact on GDP in the short run. In a perfect world, using less energy has only a small direct effect on production because, out of all the inputs to production (labor, structures and equipment, energy, and other raw materials), energy costs account for a relatively small share of output, but In the case of Nigeria, energy is a major share of output, as organizations have to provide for their own power in- house, such as generators sets etc and are exposed to the market as it relates to energy prices with the subsidy gone.

The effects on demand and the consequent indirect effects on production—could be a much bigger problem, because spending more on petroleum imports and the nation’s poor power sector will generally reduces spending on goods and services in Nigeria while it will increase prices on virtually every good and service.

5.2 Recommendations

Based on the conclusion the following recommendations have been slated:

1. Government should retain fuel subsidy while expediting the construction of the three proposed refineries.
2. Fuel subsidy should be removed as soon as these new refineries are commissioned.

iii. The proposed rehabilitation of the existing refineries should be expedited.

1. Government should vigorously pursue the revitalization of the railways. If only Nigerians had alternative to road transport, all this noise about fuel subsidy removal would not have been there.
2. Private companies should be encouraged to start building refineries now with the assurance that subsidy would be removed before they start production.
3. Government should embark on full deregulation of fuel prices to ensure market competitiveness.

vii. Government should outlaw or legislate against unauthorized dealership in the sale and distribution of petroleum products to reduce the hazards of extortion, unwarranted fire incidence leading to colossal economic loss and loss of life during periods of fuel scarcity and fuel price hike.