1.1 Background of the Study

For some number of years, Nigeria enjoyed subsidy on petroleum products. This came to an end on January 1st, 2012, after a declaration from President Goodluck Jonathan that afterwards, the subsidy was to be removed (Zaccheus, 2011). In Nigeria, the issue of appropriate pricing of petroleum product has always been a controversial policy issue. Successive governments have dealt with this problem to no avail. Suffix to say that in Nigeria, subsidy removal implemented by governments had always yielded negative effects on the citizens. According to Centre for Public Policy Alternatives (2012), a subsidy by definition is any measure that keeps the prices consumers pay for a good or product below market levels for consumers or for producers above market. The essence of having subsidy in place for products and services is that it has direct positive impact on poverty reduction in the lives of the poor masses who could not afford high prices (Nwaoga and Casimir, 2013).

Subsidies were introduced in the Nigerian energy sector in the mid 1980‟s. Something of a creeping phenomenon, the value of the subsidies has gone from 1 billion in the 1980s to an expected 6 billion Dollars in 2011. In this period the specific products targeted for subsidy have changed. Diesel oil has had its associated subsidy redacted while petrol, gasoline; kerosene continues to enjoy a 54.4 % subsidy over the international spot market price at the Nigerian pump. Economists believed that social welfare is maximized when the price of each good and service is freely determined by the interaction of buyers and sellers in open competitive markets. In practice and especially in developing countries however, policy is often driven more by political consideration than rational economic theory. The risk of social unrest, street riots, and threats of civil war very easily make introduction of market distorting policies justified. Nigeria as a case in point is under increased pressures to grow its economy. Yet countervailing forces of corruption, mismanagement of public resources and poor governance conspire to frustrate efforts to sustain growth in the face of rising population numbers and demands for a democratic dividend by the citizenry (Centre for Public Policy Alternatives, 2012).

According to Centre for Public Policy Alternatives, the justifications for introduction or removal of subsidies vary markedly. In developed economies Environmental issues, international trade and maintaining competitiveness are the main drivers of policy. Whereas welfare, poverty alleviation and election cycle politics largely underpin the reasons for which subsidies are introduced in developing countries. A new factor in the current mix of policy drivers is the renewed emphasis on governance reform championed by the Bretton woods institutions-The World Bank, IMF and the donor community. Lending urgency to this scenario is the global economic downturn and consequent rationalization by lenders, aid granting countries. As domestic demand for funds increase in these countries amounts available for aid, FDI and subsidies diminish. The consequence is a demand for greater efficacy in the economies of the aid receiving countries of which Nigeria is one.

Furthermore, the issue of fuel subsidy removal has torn this nation into two factions, the government and the economic experts on one hand and the masses on the other hand. The last fuel subsidy removal on 1st January, 2012 sparked an uprising that almost led to a revolution; this attracted a lot of public debate, opinions and reactions leading to NLC strike and demonstrations in various states. Therefore, the major focus of this study is to investigate audience perception of federal government removal of fuel subsidy in Nigeria on January 2012.

1.2 Statement of the Research Problem.

Fuel is central to the economic pursuits of Nigerians, whose sustenance daily bread is tied to this bye product of Nigeria‟s rich crude oil deposits. The Petroleum Product Pricing Regulatory Agency (PPPRA) regulates the downstream Oil and Gas industry on behalf of the Federal Government and by the removal of subsidy on Premium Motor Spirit (Petrol), the downstream sub-sector of the Petroleum industry is deregulated for Petrol. Deregulation leaves market forces as the sole determinant of product prices. While over the years, many Nigerians have opposed the implementation of the policy in the Oil and Gas Industry, international finance and donor agencies like the World Bank and IMF have been very harsh in their criticisms of the successive governments that have sustained the policy for a single inherent flaw they condemned as harmful to the growth of the Nigerian economy. However it should be noted that there were obvious flaws in the policy at inception and up to January 1, 2012 when it was removed there were more private retailers of petroleum products than the state owned NNPC stations. The regulatory framework (PPPRA) used to enforce the subsidy was weak, under resourced and suffered from the Nigerian disease. The secrecy and lack of transparency by the administrator of the subsidy (the NNPC) did not help matters either. Nigeria still could not make her refineries efficient. This means that Nigeria could not produce enough refined products for local consumption. Finally, due to the weak regulation by the PPPRA, some economic saboteurs/cabal were able to misappropriate the fuel subsidy money and channel it to their own personal pockets instead of using it for what it was intended for. These and more reasons triggered the federal government of Nigeria to remove the subsidy on fuel. By this removal of oil subsidy, the question this study seeks to answer is: What is the perception of the audience with regards to the removal of oil subsidy in January 2012?

1.3 Objectives of the Study

The objectives of this study are:

  1. To examine the audience perception of fuel subsidy removal
  2. To examine the cause of the fuel subsidy removal
  3. To ascertain the effects of fuel subsidy removal on the citizens of Nigeria.

1.4 Research Questions

The study will proffer answers to the following research questions:

  1. What is your perception of the fuel subsidy removal?
  2. What would you consider to be the cause of fuel subsidy removal?
  3. What do you consider to be the effects of fuel subsidy removal on the citizens of Nigeria?

1.5 Research Hypothesis 

H1: There is significant relationship between oil subsidy removal and cost/standard of living of the residents of Enugu metropolis.

1.6 Scope of the Study

This study investigates audience perceptions of the Federal Government removal of oil subsidy in January 1, 2012 amongst residents of Enugu metropolis. It also investigated how the audience perceived removal of oil subsidy. Decision was then made to conduct this study amongst residents of Enugu metropolis because of proximity to the base of the researcher.

1.7 Significance of the Study

The uniqueness of this study is that it will be used to determine the opinions, beliefs, attitudes and general behaviour of Nigerians on the Federal Government‟s removal of oil subsidy. Also, the study will add to the numerous literatures written on the issue of the removal of fuel subsidy by the government. It is also hoped that the findings of this study will help the government to be more alive to their duties, as it should be under a democratic government. Also, this study is significant politically because it will assist government in formulating formidable policies that will bring a more robust relationship with the people as well as engender the needed conducive environment for political and societal development. It will also help our future researchers to use the study as a source of reference for future research academic and other purposes.

1.8 Definition of Terms

The following terms that formed the topic of this study are hereby defined conceptually and operationally. The conceptual definitions are the dictionary meanings whereas the operational definitions are their working meanings they include: 13

Audience: This means those who are directly or indirectly affected by the removal of the fuel subsidy.

Perception: The general opinion held by Enugu urban residents about the removal of fuel subsidy by the federal government.

Fuel Subsidy removal: This means the withdrawer of the policy which made the price of fuel to be reduced for the affordability of average Nigerians.

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