EFFECTS OF SUBSIDY REMOVAL ON THE MOBILITY OF WORKERS IN NIGERIA
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Background of the study
Among other major factors that influences transport costs and transport rates in Nigeria is fuel. According to Innocent, Ogbu and Job (2015), fuel plays a significant role in the production of goods and services in all sectors of the economy, that is why countries find it necessary to subsidize and ensured citizens have access to fuel which is of national importance. Onyishi, Eme and Emeh (2012) stated that government subsidize fuel to address cases of market failure-mainly poverty especially in developing countries where subsidies are given to allow the poor participate in economic activities. Also, fuel subsidy protects fragile economies from shocks in the international market. 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 also affects all other factors influencing transport costs and transport rates. 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. According to World Bank (1997), fuel subsidy is any policy by the government that is aimed at reducing the price of energy consumed by citizens relative to what the price would have been in the absence of such policy. 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. The reality of subsidy is that as the pump price of fuel increases, invariably the cost of everything in Nigeria increases. Therefore the essence of subsidizing the cost of pump price of fuel is to make the cost of living, production and services affordable to every Nigerian and as well maintain fairly good standard of living. The booby trap in fuel resource is that in one hand, it is one of the major sources of revenue generation for the federal government and on the other hand, it is through the subsidization of the pump price that the standard of living and wellbeing of Nigerians are enhanced. In this circumstance, any slight increase in the pump price of fuel without a palliative measure in place inflicts economic hardship on Nigerians and usually generates resistance and protest from the organized labour, civil society coalition and the masses in general. The reason being that the fuel subsidy is the principal way ordinary Nigerians benefit from the country’s oil wealth (Campell, 2011).Fuel subsidy often leads to increase demand for fuel due to over use and waste arising from reduced price of the product, creating unnecessary shortage of supply. The strength of relationship between fuel and production is weak because small proportion of fuel is used in production of most goods in Nigeria but the strength of relationship between fuel and transportation is very strong because it is used for distributional purposes which add to the final cost of goods produced. The importance of transport in any region cannot be overemphasized. Transportation refers to the process of conveying or moving of goods and people from place to place (Anyanwu et al., 1997). According to Good and Jebbin (2015) transportation is a system for carrying passengers, raw materials and goods from one place to the other both internally and internationally, often through power driven machines. It is commonly said to refer to movement of people and goods from one place to another (Okeafor, 1998). Transportation service is the port of physical distribution activity which is concerned with the actual movement of goods to their various consumers (Good and Jebbin, 2015). Without transportation, production cannot be achieved, meanwhile, production is said to be achieved if goods get to the final consumers. Transport systems face requirements to increase their capacity and to reduce the costs of movements. All users (e.g. individuals, enterprises, institutions, governments, etc.) have to negotiate or bid for the transfer of goods, people, information and capital because supplies, distribution systems, tariffs, salaries, locations, marketing techniques as well as fuel costs are changing constantly (Jean, Claude and Brian, 2006). Moreover, Jean, Claude and Brian (2006) stated that the choice of a transportation mode to route people and freight within origins and destinations becomes important and depends on a number of factors such as the nature of the goods, the available infrastructures, origins and destinations, technology, and particularly their respective distances jointly define transportation costs. Transport costs are monetary measure of what the transport provider must pay to produce transportation services. Transportation cost covers cost on infrastructures which are fixed in nature and operating costs which are inform of variable (not fixed). Transport cost depends on a variety of conditions related to geography, infrastructure, administrative barriers, energy, and on how passengers and freight are carried. Also, transport rates are the price or fare of transport services paid by their users to the transport service provider. Transport rates are also inform of monetary measure, hence, before such price or fare are being paid, transport users will negotiate the monetary cost with the transport service provider based on distance to be covered when moving a passenger or a unit of freight between a specific origin and destination. They may not necessarily express the real transport costs. Therefore, the study examines the effects of subsidy removal on the mobility of workers.
Statement of the problem
The Nigerian economy has always been structured to primarily depend on the production and distribution of cost-effective petroleum products. The typical Nigerian home relies on subsidised by-products of crude oil, such as fuel and kerosene, for both residential and commercial use. The reliance on public energy supply from the Power Holding Company of Nigeria (PHCN) is further hindered due to its inconsistent and unreliable nature. Attempts to remove petrol subsidy by past administrations in Nigeria triggered protests and stiff resistance. After swearing-in on May 29, the President Bola Ahmed Tinubu’s administration removed fuel subsidy in Nigeria. Nigeria's new President Bola Tinubu has said his decision to remove a popular petrol subsidy would impose an extra burden on citizens but would free up money for education, regular power supply, transport infrastructure and healthcare (Odewale, 2023). Irrespective of the benefit of fuel subsidy removal as pointed out by the Nigeria President, the removal of the subsidy has resulted in the increased transportation costs due to the high fuel prices, directly impacting agricultural production. The impact of removing fuel subsidy in the short-run is increase in transportation cost and transportation rate which directly and indirectly affect the cost of physical distribution, material handling, marketing, logistics and overall production. In the middle-run, the citizenry struggles to adjust for the market competition to surface and in the long-run, market competition is expected to fall the price of fuel. But it is quite obvious that fuel subsidy was totally removed in the current administration without provision of efficient infrastructures and other forms of energy which can all serve as close substitutes to fuel and make life comfortable. Therefore this study seeks to investigate the effects of subsidy removal on the mobility of workers.
Objective of the study
The broad objective of the study is to examine the effects of subsidy removal on the mobility of workers (A case study of FUOYE lecturers). the specific objectives is as follows:
- To find out the effects of fuel subsidy and its removal on transportation cost in Nigeria.
- To examine the extent to which transport cost have increased due to the removal of fuel subsidy.
- To assess whether subsidy removal have an effects on mobility of workers.
Research Questions
The following questions have been prepared for the study:
- What is the effects of fuel subsidy and its removal on transportation cost in Nigeria?
- What is the extent to which transport cost have increased due to the removal of fuel subsidy?
- Did subsidy removal have an effects on mobility of workers?
Research hypotheses
The following hypotheses have been formulated for the study:
H0: Subsidy removal did not have an effects on mobility of workers
Ha: Subsidy removal did have an effects on mobility of workers.
Significance of the study
The study is significant to the Nigerian government and the citizens as there is a need for more awareness on the rmoval of fuel subsidy as there are lots of information which are not right, but because government do not carry the citizens along the impact seems to be hard on the populace.
The study is also significant to the academic community as it will contribute to the existing literature.
Scope of the study
The study focus on the effect of subsidy removal on the mobility of workers. Hence, the study will find out the effects of fuel subsidy and its removal on transportation cost in Nigeria. The study will also examine the extent to which transport cost have increased due to the removal of 2023 fuel subsidy. Finally, the study will assess whether subsidy removal have an effects on mobility of workers. Hence, the study is delimited to lecturers in Federal University Oye, Ekiti State.
Limitation of the study
Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. Insufficient funds tend to impede the efficiency of the researcher in sourcing for the relevant materials, literature, or information and in the process of data collection (internet, questionnaire, and interview), which is why the researcher resorted to a moderate choice of sample size. More so, the researcher will simultaneously engage in this study with other academic work. As a result, the amount of time spent on research will be reduced.
Definition of terms
Fuel Subsidy: government effort in paying for the difference between the pump price of fuel at the petrol station and the actual cost
Mobility: the ability to move or be moved freely and easily.
Lecturers: a person who gives lectures, especially as an occupation at a university or college of higher education.
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