Strategies for Managing Petroleum Products Scarcity in Nigeria
Chapter One
Objective of the study
The main objective of the study is to examine the strategies for managing petroleum products scarcity in nigeria. Specifically, The objective sought to achieve are to:
- identify causes of petrol scarcity in Nigeria
- assess the effect of petrol scarcity on the lives of Nigerians,
- ascertain the effects of petrol scarcity on the economy of Nigeria
- identify the strategies of government in curbing incessant petrol scarcity in Nigeria.
- ascertain the most effective strategic management approach toward managing petrol production and supply by NNPC and other subsidiaries in Nigeria
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Conceptual Review
Fuel Scarcity
Petrol or fuel otherwise called PMS is a byproduct of crude oil. The word was borrowed from French ‘pétrole’, which in turn came from Latin petroleum and was taken over directly into English in the 16th century. Carless Capel, a German wholesaler was the first to use the term ‘petrol’ as a trade name in the year 1892 (Energy Bulletin, 2011 in Akpan & Nnamseh, 2014). According to Longman English Dictionary, fuel is a form of energy used for the energizing of production machines. Fuel is used in a variety of activities ranging from production, mobility, cooking, electricity, supply, sources of foreign exchange, to mention but few. In essence, its scarcity affects the functionality of many businesses in various ways.
Much appears to have been written on the issues of fuel scarcity; with minimal efforts to its definition. Akpan & Nnamseh (2014) described petrol or fuel scarcity as a malady and a serious economic problem in Nigeria. In their view, this is a disease or ailment that has eaten into the fabrics of the nation’s economy. Fuel Scarcity could be described as the non availability of fuel in time of need at the approved price. In other words, fuel scarcity is not limited to the absence of fuel at the required time, but also the availability of it at higher rate.
Causes of Fuel Scarcity
Efforts have been made at identifying the causes of fuel scarcity. Mai, Mayai and Tiitmamer (2016) believe that numerous factors are responsible to why fuel gets scarce and they attributed it to lack of functional infrastructures, high taxes and duties, absence of refineries and depots, growing demand for oil by electricity producing and consuming sectors, and inefficiency in energy. In South Sudan, Mai et al (2016) argued that despite being an oil producing country, lack of downstream infrastructures to refine crude oil and stockpile sufficient fuel for local consumption has left the country with sporadic shortage of fuel supply and high prices.
On the causes of petrol scarcity in Nigeria, Akpan and Nnamseh (2014) attributed it to hoarding, excessive corruption or mismanagement, oil pipeline vandalism, insufficient or malfunctioning refineries and bottlenecks in the distribution system. This conjectured belief was substantiated by the result of the study conducted by the Departments of Petroleum Resources (DPR, 2012). It indicated that petrol scarcity or crisis in Nigeria is caused by activities of fraudulent marketers who, despite the effort of DPR, encourage and sell adulterated products.
Theoretical Review
Commodity scarcity has been theorized by different scholars who, in their separate studies, explain the factors that cause scarcity, why people react to scarcity and when scarcity becomes eminent. These theories are the Frustration-Aggression theory, the Hubbert peak theory, as well as the demand and supply theory. The Frustration – Aggression Theory posits that scarcity occurs absolutely when people do not have enough to survive as when petrol scarcity takes place, and relatively when people have enough to survive but have less than those around them.
Another relevant theory is the Hubbert peak theory which explains that when oil is peak, then its production will naturally deplete and scarcity of the product will begin to set in. By this theory, scarcity of petrol follows a natural decline in the production of oil due to its having reached the highest point production. Because, there are other causes of petrol shortage, this theory only provide an insight into natural scarcity not artificial scarcity of petrol, and as such does not well give superior argument to this study.
The Theory of Demand and Supply is one of the basic and very popular theories in economic. It postulates that whenever the demand for any product is greater than the supply, scarcity is very evidently a sure experience. This theory explains that petrol scarcity is a function of the demand side activity; that when people do not need a thing, the scarcity of the thing cannot be experienced.
Petrol genealogy, causes of scarcity and crisis situation in Nigeria
Petrol otherwise called gasoline is a byproduct of petroleum or say crude oil. The word was borrowed from French pétrole, which in turn came from Latin petroleum (itself taken over directly into English in the 16th century). This means ‘rock-oil’. Carless Capel, a German wholesaler was the first company to register ‘petrol’ as a trade name in year 1892. It is also called Benzin in Germany which is derived from a chemical named Benzene (Energy Bulletin, 2011). Other byproducts of petroleum are Liquefied Petroleum Gas (LPG), diesel, kerosene, etc. All are energy rich fuels. Initially, petrol was used as cleaning liquid to remove strains. It was available in cans. Petrol is also used for lighting in the form of white gas which is highly purified petrol. By 1950′s oil took over as major fuel from the reigning coal and so started evolution of filling stations. Petrol has been the main reasons for the developments in car engines since last 100 years. Most of the car engines are designed according to the kind of petrol available at that time.
CHAPTER THREE
RESEARCH METHODOLOGY
Study Design
It is a term used to describe a number of decisions which need to be taken regarding the collection of data before they are collected. (Nwana, 1981). It provides guidelines which direct the researcher towards solving the research problem and may vary depending on the nature of the problem being studied. According to Okaja ( 2003, p. 2),” research design means the structuring of investigation aimed at identifying variables and their relationship, it is used for the purpose of obtaining data to enable the investigator test hypothesis or answer research question by providing procedural outline for conducting research”. It is therefore, an outline or scheme that serves as a useful guide to the researcher in his efforts to generate data for his study.
Survey and secondary research design were adopted. This is because by its nature, the study involved the use of questionnaire methods as well as archival retrieval technique and document analysis.
Population/sample of the study
A study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitute of individuals or elements that are homogeneous in description (Prince Udoyen: 2019). In terms of Population, the 2013 Fact Books of the Independents Petroleum Marketers Association of Nigeria (IPMAN) and that of National Union of Petroleum and Natural Gas workers (NUPENG) indicated the total number of its members to be 7792 and 18 members from the Major Oil Marketers Association of Nigeria (MOMAN) in Akwa Ibom State. Judgmentally, a total number of 150 consumers were chosen to participate in the research. Putting the figures together it becomes 7960. This figure formed the population from which a sample of 396 was selected using Taro Yamen’s formula given as: n = N/I+N(e)2
where n = sample size,
N = population,
e = acceptable margin of error (5%),
I = constant;
Therefore given “N” to be 7960 and “e” as 5 percent; n was determined as shown below: n = 7960/ I+7960 (0.05)2 = 396.0199005 =396. Consequently, a total of 396 copies of questionnaire were personally administered by the researcher to the respondents during official hours at their places of work. From the 396 copies of the questionnaire distributed 351 copies were properly completed and returned. This represented 88.64 percent.
CHAPTER FOUR
RESULTS AND DISCUSSIONS
From the analyses of the research questions to the test of the research hypotheses, several findings have been made. For purposes clarification and explicitness, and in line with modern research tradition, these findings were discussed according to each of the research objectives. First was the result on the trend of petrol price adjustment in Nigeria as presented in Table 2
Table 2 : Trend of petrol price adjustments in Nigeria since 1978
CHAPTER FIVE
CONCLUSION AND RECOMMENDATIONS
This study has made an in-depth investigation into the concept of petrol scarcity and its attendant risks on the lives of Nigerians and performance of Nigerian economy. The main thrust was to ascertain how managers of agencies and organizations saddled with the responsibility of petrol production and supply could apply modern strategic management approaches in carrying out their operations without incessant occurrence and experience of avoidable petrol scarcity and shortage. This study was informed by the need of the present day economic thinkers to bring petroleum products to all and sundry for their use without unnecessary hiking of the product price and generating a condition of scarcity that paralyze economic activities at both micro and macroeconomic levels. Extensive literature was reviewed; requisite data were also sourced, collected and analyzed with appropriate statistical tools. Based on the findings and discussions made thereof, it is thus concluded that a number of factors are responsible for scarcity of petrol at different degrees of effects and that this menace has influenced Nigerian and the economy negatively. Moreover, government strategies so far adopted have not significantly addressed the problem and the risks of petrol scarcity in Nigeria. Therefore there is need for alternative strategic approach to managing petrol in Nigeria to avert and reduce rampant cases of petrol shortage and scarcity. Based on this conclusion, the researchers wish to make recommendations that follow:
- Management of NNPC and associated agencies should work against the found causative factors of petrol scarcity by applying an appropriate strategic management. The approach suggested here for their application is the Balanced Scorecard. This approach will help organizations operate from the perspective of various stakeholders, taking into consideration the various interests such that the tendency for heinous activities, corruption and mismanagement would be averted.
- PEST analysis or STEEP analysis or approach should be employed by the managers of petroleum sector. This approach would allow for the examination of the macro-economic environmental factors such as politics, economics, social factors and, government regulations in which case issues that concern the populace would be addressed properly
- Since the effect of scarcity on economy is more of external than internal the appropriate strategic management approach to be used in order to avert and make the effect of petrol scarcity on economic performance negligible is by applying the Porter’s Five Forces Analysis. This approach or framework helps to determine the competitive intensity and therefore attractiveness of a market to both foreign and local investors. When this happens, petrol would be made available as there would be competition.
- Since it was found that administrative bottlenecks and legal limitations caused petrol scarcity, the petroleum industry bill (PIB) should be passed into law to remove entanglements and empower relevant agencies to operate legally. The Bill will also help in regulating the activities of petroleum dealers in the sector such that any practice found to be inimical to petroleum product availability in the right quality, quantity and price would be discouraged
References
- Adagba, O; Ugwu, SC. and, Eme, OI. 2012. Deregulation and anti-subsidy removal strikes in Nigeria, 2000 -2012. Arabian Journal of Business and Management Review, 1(7):69-83
- Balouga, J. 2012. The political economy of oil subsidy in Nigeria. International Association for Energy Economics, Second Quarter 2012, 31-36
- Birol, F. and Guerer, N. 1993. Modeling the transport sector fuel demand for developing economies, Energy Policy Butterworth-Heinemann Ltd; 1163- 1172.
- Chaffee, E. 1985. Models and conceptual frameworks of strategic management. In Energy Bulletin (2011). Peak Oil Primer. Available at: http://www.energybulletin.
- Energy Bulletin, 2011. Peak Oil Primer. Available at: http://www.energybulletin.
- Femi, A. 2013. Nigeria ranks 4th in global oil supply outages. BUSINESSDAY Newspaper, 11September: 1
- Furtado, AT and Suslick SB. 1993. Forecasting of petroleum in brazil using the intensity of energy technique; Energy Policy; Butterworth-Heinemann Ltd; 958-968.
- Gurr, T.R. 1970. Why Men Rebel. Princeton: Princeton University Press.
- Ikponmwosa, AN. and Odogwu, CC. 2012. Deregulation and privatisation of the upstream and downstream oil and gas industry in Nigeria: Curse or Blessing? International Journal of Business Administration, 3 (1):16-20.
- Nag, R. Hambrick, DC. Chen, MJ. 2007. What is strategic management, really? Inductive derivation of a consensus definition of the field. Strategic Management Journal, 28 (9): 935-955.
