The Effect of the 2021 Fuel Price Hike on the Transportation System in Nigeria (A Case Study of Ascent Transport Company (ATM), Abuja)
Chapter One
Objective of the study
The main purpose of this study is to investigate the effect of fuel price hikes on the transportation system in Nigeria using Ascent Transport Company (ATM), Abuja as a case study. The study specifically aimed to:
- Examine the effect of fuel price hikes on passengers of ATM, Abuja.
- Investigate the effect of fuel price hikes on the profitability of ATM, Abuja.
CHAPTER TWO
LITERATURE REVIEW
INTRODUCTION
Our focus in this chapter is to critically examine relevant literatures that would assist in explaining the research problem and furthermore recognize the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps.
Conceptual framework
Fuel
Fuel is a combustible substance, containing carbon as a main constituent, which on proper burning gives large amount of heat, which can be used economically for domestic and industrial purpose. According to Ezeh (2012), fuel in Nigeria is an inelastic product both at demand and supply sides, which means that it is very difficult for consumers to find alternatives to the use of it in their daily lives. Alternatives such as electric trains, solar heaters and cookers are non-existent in Nigeria and hydropower and dams are not dependable sources of power in Nigeria
FUEL Subsidy
Fuel subsidy According to the Academics Dictionary of Economics (2006), subsidy can be defined as the cash incentive given by the government to an industry with a view to lower the price of the product of the concerned industry and to raise its competitive power. This may be given as a counter balancing measure to the imposition of the custom duty (In the nature of protection duty) by an importing country government. One important objective of subsidy is to keep its prices below the cost of production. Moreover, subsidy can also be defined as any measure that keeps prices consumers pay for a goods or products below market levels for consumers or for producers above market. Subsidies take different forms. Some subsidies have a direct impact on price. These include grants, tax reductions and exemptions or price controls. Others affect prices or costs indirectly, such as regulations that skew the market in favor of a particular fuel, government sponsoring technology, or research and development. Thus, there are two major classes of subsidies 1. Production subsidies: These form is associated with developed countries and; 2. Consumer subsidies: This is found mainly in developing countries like Nigeria. A subsidy is a reverse tax. It is a deliberate attempt by government to support a chosen economic agent a consumer and a producer and it can be applied in any market that involves the buying and selling of products and or services. Furthermore, according to OECD, subsidy is basically government action that decreases the consumption price of the consumer and or increases the selling price of the producer. Subsidies enjoy widespread use in several countries and several commodities such as petroleum products, food or farm inputs liker fertilizer and machinery (UNEP, 2002). Fuel subsidy is a government programme created to reduce how much Nigerians have to pay for petroleum motor spirit (PMS), automotive Gas Oil (Diesel), and to protect the citizens from crude oil volatility on the international market.
CHAPTER THREE
RESEARCH METHODOLOGY
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled.
AREA OF STUDY
Ascent Transport Management is a transport company with its headquarter in Lagos with different branches in other states.Ascent Transport Management (ATM) offers fully air conditioned luxurious buses and cars suitable for short and distance travel as well as courier services and charter services with professional drivers.Ascent Transport Management(ATM Nigeria Limited) provides the routes below for easy identification. each of the parks listed can take their passengers to the other terminals of ATM from any of the locations.Ascent Transport Management Abuja is located at Atlantic Mall, Plot 482, Obafemi Awolowo Way, Utako, Abuja FCT , Abuja, Nigeria
POPULATION OF THE STUDY
According to Udoyen (2019), 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.
This study was carried out to examine the effect of 2021 fuel price hike on transportation system in Nigeria using Ascent Transportation Management as a case study. Staffs of ATM Abuja branch forms the population of this study. Statistics derived from the human resources department of ATM company shows that the total population is 102 .
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
Introduction
The focus of this chapter is to present and analyse the data collected. The total 80 questionnaires was issued and all were retrieved. 80 respondent answered the research questions and thus its analyzed.
CHAPTER FIVE
CONCLUSION AND RECOMMENDATION
Introduction
This chapter summarizes the findings into the effect of 2021 fuel price hike on transportation system using Ascent Transport Company as case study.The chapter consists of summary of the study, conclusions, recommendations and suggestions for further studies.
Summary Of Study
In this study, our focus was to examine the effect of 2021 fuel price hike on transportation system Using Ascent Transport Company Abuja as a case study. The study aimed at examining the effect of fuel price hike on passengers of ATM, Abuja. It Investigated the effect of fuel price hike on the profitability of ATM, Abuja. The study made use of random sampling. 80 eighty responses were elicited from the field survey. Staffs of Ascent Transportation Company form the population of the study.
Conclusion
The following conclusion was drawn from the finding of the study
- Fuel price hike has a significant negative impact on Nigeria Transport system and passengers as a whole.
- The increase in fuel price limit mobility of passengers who would have love to travel because of the fright that cost of transportation is on the increase
- Increase in fuel has a negative impact on transport companies as they tend to invest more on low energy vehicles and reduce the number of their vehicles on the road.
- Moreso fuel price hike affects transport companies as they limit the number of route they toll. This is because their might be a low tide of patronage from passengers.
- By limiting the number of vehicles makes cost of operation high for transportation companies and their over heads increased as they might be forced to shut down a bit until fuel price comes back to normal.
Recommendation
The following recommendation was made due to finding of the study
- Government of Nigeria should see the need to put measures in place to subsidize fuel in the country and avoid unnecessary hiking of the fuel price.
- Transport companies should draft a good strategy and mechanism to always curb the fuel hike issues in the nearest future
- Fuel subsidy will reduce the overall transport costs and rates incurred on transport distance and accessibility, also, the removal of fuel subsidy will increase the overall transport cost and rates incurred on transport distance and accessibility;
- Fuel subsidy will reduce the overall transport costs and rates incurred on product packaging, special handling, bulky or perishable products also, the removal of fuel subsidy will increase the overall transport cost and rates incurred on product packaging, special handling, bulky or perishable products;
- If goods are transported in large quantity, more fuel will be required; therefore, the advantage incurred on transporting large volumes of goods is a disadvantage to the amount of fuel to be consumed. If fuel is been subsidized, the cost of fuel to be consumed when transporting large volumes of goods will be minimized but in the case of subsidy removal, the cost of fuel to be consumed will be at a very high rate and transport service provider must be critical and analytical in taking decisions of cost;
- In a nation that has no close substitutes to vehicle fuel or energy, fuel subsidy is mostly preferable and will results into reduced transport costs and rates but in the case of fuel subsidy removal, transport costs and rates will increase. It is quite better that before subsidy removal, other sources of energy or fuel to power a vehicle such as hydrogen gas, electric, solar and others should be made readily available, for it will normalize the high effects on transport cost and overall production cost;
- If fuel is subsidized, the import costs will be minimized but if fuel subsidy is removed, import cost will be very high and this will significantly increase the cost of the products and consumables. If Nigeria will rely on importation, there is need for fuel subsidy. The present shifting in the diversification of the economy should also results into shifting from fuel subsidy to fuel subsidy removal. This will also improve the development of Nigeria economy;
- Efficient transport infrastructures results into low fuel consumption and the better if fuel subsidy removed. Also, poor transport infrastructures results into high fuel consumption and fuel subsidy is needed. Hence, fuel subsidy removal should be better considered if the government must have provided a smooth transport network for easy accessibility.
Reference
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- Afolabi, J. (1999). The Oil Price of Hike Blunder. Newswatch, January 18, (Pp. 8–16).
- Anyanwu, J. C. A. Oyefusi, H. Oaikhenan and F. A. Dimowo (1997). The Structure of the Nigerian Economy (1960-1997). Onitsha: Joanee Educational Publishers Ltd.
- Campbell, J. (2011). Nigeria’s fuel subsidy is more than economics. www.google.com.
- Centre for Public Policy Alternatives (2011). Fuel Subsidy Removal: Nigeria. (Pp. 1-16).
- Emeh, O. I, and Onyishi, A. O. (2012). The Domestic and International Implications of Fuel Subsidy Removal Crisis in Nigeria. Kuwait Chapter of Arabian Journal of Business and Management Review, Vol. 1 (6).
