Effective Distribution And Economic Growth
(A Case Study Of Nnpc Enugu Depot)
Effective distribution of resources is integral to fostering economic growth, as it ensures equitable access to opportunities and resources across various sectors of society. When resources are allocated efficiently and fairly, it can stimulate productivity, innovation, and consumption, thereby fueling economic expansion. A balanced distribution system enables marginalized communities to participate actively in the economy, leading to a more inclusive and sustainable growth trajectory. Moreover, equitable distribution helps mitigate social disparities, enhances social cohesion, and fosters a sense of collective prosperity, which are essential elements for long-term economic development. In essence, prioritizing fair distribution mechanisms is crucial for fostering robust and sustainable economic growth.
This research is based on the effective fuel distribution and economic growth in Nigeria. The research was carried out to find out the extent to which the entire population in Enugu Metropolis has suffered due to fuel scarcity. The population used for this study is the workers of NNPC, car owner, businessmen and women and the entire population of Enugu Metropolis. The researcher used primary and secondary data which comprised of interviews and questionnaire to get information. From the data analysis, the researcher came up with the following findings: the middlemen contribute to fuel scarcity, transportation became high because of fuel scarcity, fuel scarcity has led to rise in price of product in the market and pipelines that led to the various depots should be checked regularly for any possibility of leakage.
Title Page
Approval Page
Dedication
Acknowledgments
Abstract
Table of Contents
CHAPTER ONE
1.0 Introduction 1
1.1 Background of the study 1
1.2 Statement of the problem 4
1.3 Objective of the study 6
1.4 Statement of hypothesis 6
1.5 Significance of the study 6
1.6 Scope of the study 7
1.7 Limitations of the study 8
1.8 Definitions of terms 8
1.9 Brief history of NNPC Depot 9
CHAPTER TWO
2.0 Review of related literature 12
2.1 History of Oil Industry in Nigeria (NNPC) 12
2.2 Nigerian’s development and oil industry 14
2.3 Contributions of the petroleum industry to
Nigerian’s economic development 18
2.4 Function /role of Nigeria National Petroleum
Corporations (NNPC) 20
2.5 NNPC and distribution of petroleum in Nigeria 23
2.6 Problems of fuel distribution in Nigeria 28
2.7 Effectiveness of fuel distribution and economic growth
in Nigeria economy 29
2.8 The role of task force on the management
of fuel scarcity 30
2.9 Scarcity of other essential commodities and its effect 36
CHAPTER THREE
3.0 Research design and methodology 39
3.1 Sources of data collection 39
3.2 Area of the study 41
3.3 Population of the study 42
3.4 Sample size determination 42
3.5 Instruments of data collection 43
3.6 Distribution of the data collection instrument 44
3.7 Method of data analysis 44
CHAPTER FOUR
4.0 Data presentation and analysis 46
4.1 Presentation of data 46
4.2 Data analysis 54
4.3 Test of hypothesis 56
CHAPTER FIVE
5.0 Summary of findings, Conclusion and
Recommendations 66
5.1 Summary of findings 66
5.2 Conclusion 67
5.3 Recommendations 68
Bibliography 69
Appendix
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In the past Nigerians solely depended on the exportation of agricultural product for their source of income. This continued until the discovery of the presence of the presence of oil in our country, especially in Port Harcourt. This made them (Nigerians) to divert from agriculture to the exportation of oil to other countries, which was actually fetching them much money even till this present time.
There are many subsidiary oil companies scattered all over the country but the biggest among them is in Port Harcourt and it is called the Nigeria National Petroleum Company (NNPC). It is from here that crude oil is extracted from the ground refined to get those components like fuel, kerosene and gas.
There are deploys scattered all over the country, like shell port Harcourt, NNPC oil, EIF oil company, Warri pipelines are directed towards these oil companies to facilitate distribution. Tanker drivers and other dealers will load from the depot and distribute to filling stations, then the consumer will buy from the filling stations.
Fuel supply has been moving smoothly in the country before the announcement of the budget by the head of state in January last four year 1999. It was in February 1999 that the whole issue of fuel scarcity started. This has made it difficult for the government to accomplish that which it proposed to do the budgets.
A subsidy by definition is any measure that keeps prices consumers pay for a good or produce below market level for consumer or for producers. Subsidies take different form. 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).
According to Eyiuche (2012) the federal government operated fuel subsidy with the aim of making petroleum products available to cushion the effect of actual market prices of the product on the general populace. The federal government during the military era was of the opinion that the cost of production, transportation of fuel will be so much a heavy burden for the poor masses of Nigerians to bear alone and therefore decided to pay part of the total amount of fuel cost for every Nigeria in order to make the product available and affordable. This is actually what is referred to as fuel subsidy that is the government paying part of the total amount of fuel cost. His intention of cushioning the effect of actual market price of fuel product actually worked for a period of time, say from 1973 – 1983. On March, 31st 1986 Gen. Ibrahim Babangida increase the pump price of petrol from 20k to 39.5k.
This was about 97.5% increment; sources have it that issues worsened with the advent to democracy. On June 1st, 2000 Chief Olusegun Obasanjo increased the pump price of petrol from 20 to 30 (50% increment).
Gradually, the aim of the military government that introduced fuel subsidy was subdued and defeated. The benefits of fuel subsidy to the average Nigerian was short lived. The federal government claim to have spent over 1.4 trillion on fuel subsidy in the past five years, it also claimed to be paying heavily to subsidize kerosene which is imported into the country through the Nigerian National Petroleum Corporation (NNPC), the fuel subsidy policy has also bred several unintended consequences and practices such as smuggling of petroleum products out of the country, the federal government also claimed that the fuel subsidy policy has made them unable to tackle problems of our collective infrastructure which are the roads, power, agriculture fixing the refineries etc
1.2 STATEMENT OF THE PROBLEM
The word “scarcity” means when there is insufficiency of something. Since there is insufficiency of fuel it is termed as fuel scarcity.
In the past, there has not been any services fuel scarcity. Everything was moving smoothly, the industrialist both public and private does not have any problem. Economically the price of goods and services, were affordable by the people. Car owners can just go to filling station and buy fuel at a normal price of N22.00 per liter and with much ease. Things were moving smoothly in the country and in this part of Enugu Metropolis, Imo State until 1994 when we had one case of fuel scarcity not until on up till this movement of this study.
Because of fuel scarcity, people are so desperate to by fuel for their business. For this reasons, whenever any information was passes concerning the presence of fuel in any filling station, car owners will go there and queue-up. Some of them will have to sleep in the filling stations a day or more than two days while waiting for their turn. People or car owners when they cannot buy fuel in any filling station, are forced to buy from the black market at an exorbitant price. Some people use big gallons to buy fuel that will serve them for some days.
For the reason that there is insufficient fuel in the filling station, makes people sell fuel in ration so that everybody present will buy. The car owners who think the fuel will not reach them will start jumping the queue, thereby causing fights among themselves. Because of this reason, the filling station owners invite soldiers so that there will be peace and orderly queue in the filling stations. Fuel scarcity is sometimes artificial in the sense that during the Christmas period, filling station owners will just hoard their fuel in order to sell at a high price.
1.3 OBJECTIVE OF THE STUDY
This study has the following objectives:
1. To find out the cause of fuel scarcity
2. To recommend what can be done to solve the problem of fuel scarcity.
3. To find out how the fuel scarcity has affected the business men and women, civil servant etc (The total population of Enugu Metropolis, Imo State).
1.4 STATEMENT OF HYPOTHESIS
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 is significant in the following ways:
1. It would use a market structure, conduct performance framework to analyze the industry, both before and after deregulation, as a means of judging the effect of fuel distribution and economic growth in terms of petroleum products prices.
2. The significant of this study also lies in the fact that it would contribute to existing literature on the subject matter by providing an expository analysis of the pattern of increase of petroleum products prices in Nigeria.
3. This would enhance policy formulation in the fuel distribution and economic growth in Nigeria with the intention of alleviating the suffering of the masses.
4. It would also be an invaluable tool for students, academic, institutions and individuals that want to know more about the deregulation of the downstream sector of the Nigerian oil industry.
1.6 SCOPE OF THE STUDY
This study is carried out in Enugu Metropolis, Imo State to study the operation of the Nigeria National Petroleum Company (NNPC) and the middlemen. The study is only based on petrol alone and not for kerosene or gas generally.
1.7 LIMITATIONS OF STUDY
The research work is limited to fuel scarcity in Nigeria with a case study of NNPC in Enugu Metropolis, Imo State. This study was carried out purely as an academic exercise and therefore could neither receive any financial support from the government or any private enterprise.
The limited financial resource of the researcher is thus a major handicap and thereby resulted in limiting the study only to Enugu Metropolis, Imo State.
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 an action or cause.
Fuel: Mineral resources that provide unclear or internal energy requirements.
Scarcity: Something not been enough that is difficult to obtain and less than is needed.
Middlemen: Trader who passes goods from the producers or from where they are produce to the final customer or final buyer.
Fuel Subsidy: The amount of money that the governments pay to the capable of fuel importers while importing fuel so the price of fuel will be cheaper for the people to purchase.
Subsidy: Any measure that keeps prices consumer pay for a good or produce below market price for consumer or for producer.
Distribution: This is a set of independent organizations involved in the process of making a product or service available for use or consumption by the consumer.
1.9 BRIEF HISTORY OF NNPC ENUGU DEPOT
Nigeria’s oil industry is dominated by the national oil company, Nigeria National Petroleum Corporation (NNPC) founded in 1977. It is the major partner in the upstream joint ventures with the seven sisters or major multinational petroleum exploration and production companies.
These are the largest and oldest in Nigeria Shell Petroleum Development Company (SPDC) or better known as shell others are mobile producing Nigeria unlimited, chevron Nigeria, EIF petroleum Nigeria and the Nigeria Agip oil company, NAOC and affiliate, Agip Energy and Natural Resources (AENR). The NNPC owns an average 57 percent in these JVS. Profits from the JVS are shared in the same ratio for the NNPC shell JV share structure, NNPC 55% royal Dutch shell 30%, EIF 10% and Agip 5% until early 90s, NNPC held 75% in the JV. It sold off 20 percent, 10% sold to shell, 10% to EIF and 5% to Agip.
Chevron JV, NNPC 60%, chevron 40%
Mobile JV, NNPC 60%, Mobil 40%
EIF JV, NNPC 60%, EIF 40% (France) Nigerian.
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Effective Distribution And Economic Growth:
Effective distribution of resources and income can have a significant impact on economic growth. When resources and income are distributed more equitably within a society, it can lead to various positive outcomes that stimulate economic growth. Here are some key ways in which effective distribution can contribute to economic growth:
- Reduced Income Inequality: High levels of income inequality can hinder economic growth. When a significant portion of the population has limited access to resources and opportunities, it can result in underutilization of human capital and entrepreneurial potential. Addressing income inequality through policies that promote fairness and inclusivity can help unlock the productive capacity of a larger portion of the population.
- Increased Consumer Demand: When income is distributed more evenly, a larger portion of the population has the purchasing power to buy goods and services. This increased consumer demand can drive economic growth by encouraging businesses to expand production and invest in new ventures to meet this demand.
- Enhanced Human Capital: Equitable access to education and healthcare can improve the overall human capital of a society. When more people have access to quality education and healthcare, it can lead to a more skilled and healthy workforce, which is essential for sustained economic growth.
- Incentives for Entrepreneurship: Effective distribution policies can create incentives for entrepreneurship and innovation. When individuals believe that their hard work and innovations will be rewarded fairly, they are more likely to invest in starting businesses and developing new products or services. This entrepreneurial activity can stimulate economic growth.
- Social Cohesion and Stability: Societies with more equitable distribution of resources often experience greater social cohesion and stability. This stability can provide a conducive environment for economic growth by reducing the risks associated with political and social unrest.
- Infrastructure Investment: Effective distribution policies can allocate resources for infrastructure development in a more balanced manner. Improved infrastructure, such as transportation networks, communication systems, and energy supply, can enhance productivity and promote economic growth by reducing transaction costs and increasing efficiency.
- Access to Finance: Ensuring that a broader segment of the population has access to financial services can promote economic growth. When more people have access to credit and banking services, they can invest in education, entrepreneurship, and asset accumulation, which can stimulate economic activity.
- Inclusive Growth: Economic growth that benefits a wide range of people is more sustainable in the long term. Policies that focus on inclusive growth, where the benefits of growth are shared across different income groups, can lead to more stable and sustainable economic development.
- Resource Allocation Efficiency: Effective distribution policies can improve the allocation of resources within an economy. When resources are allocated efficiently based on merit and need rather than arbitrary factors, it can lead to better utilization of resources and higher overall economic output.
However, it’s essential to recognize that the relationship between distribution and economic growth is complex, and the specific impact of distribution policies can vary depending on the context of each country or region. Effective distribution policies must consider various factors, including the stage of economic development, the size of the economy, cultural factors, and the existing institutional framework. Furthermore, the design and implementation of these policies need to strike a balance between promoting equity and not stifling incentives for productivity and innovation.