The Adverse Effect Of Fuel Scarcity On Farm Produce

Project and Seminar Material for Agricultural Engineering AE

The Adverse Effect Of Fuel Scarcity On Farm Produce


Everybody appreciates the fact that when motorists pay more for fuel, the transport fare increases. This has been the case even when the increase is only marginal. In the particular case where the cost of fuel is expected to double, the increase in transport fare will be astronomical. This will in turn affect everything else – school fees, house rent, just name it. Therefore, this study took a critical look at the impact of Fuel price increase on the Nigerian economy(Whether negative or positive).The study adopted a survey research design approach to evaluate the level of effect the fuel price increase has on the Nigeria economy. The population of the study is made up of Farmers -CS, traders-MMW and staff in the private sectors SPS concerned with petrol and gas affairs. A sample size of 120 persons was selected at random. It was distributed as follows: Farmers (18), traders (55) and staff in the private sectors (47). A pre test was conducted and outcome yield “r”= 0.92 indicating a high degree of consistency and reliability. The instrument was 8- term survey questionnaire with a – 5 Likert scale response options of Very Relevant (VR), Relevant (R), No Effect (NE) Irrelevant (I), and Very Irrelevant (VI). The questionnaire was structured in line with the research objectives, questions and hypothesis of the study. The Pearson product moment correlation coefficient was used to confirm formulated hypotheses. Finding revealed that there is a significant relationship between the recent increases in fuel prices and economic growth in Nigeria. It was also discovered that the Nigeria agricultural sector is not developing because of the effect of fuel price hike on purchasing power and finally the finding showed that there is significant relationship between increase in pump price of petroleum and food security. The paper therefore recommended that Government should retain fuel subsidy while expediting the construction of the three proposed refineries; Fuel subsidy should be removed as soon as these new refineries are commissioned; the proposed rehabilitation of the existing refineries should be expedited.

Table of Contents

Chapter One:


  • 1.1 Background to the study
  • 1.2 Statement of the problem
  • 1.3 Research questions
  • 1.4 Purpose of the study
  • 1.5 Hypothesis of the study
  • 1.6 Significance of the study
  • 1.7 Definition of terms
  • 1.8 Organization of Study

Chapter Two:

Review of Related Literature

  • 2.1 Effect of the Recent Increases in Fuel Prices on Economic Growth in Nigeria
  • 2.2 Effects of Fuel Price Hike on Purchasing Power
  • 2.3 Concept of Subsidy
  • 2.4 Role of Fuel Subsidy
  • 2.5 Impacts of Fuel price increase on Economy
  • 2.6 Impacts of Fuel price increase on the Balance of Payment
  • 2.7 Effects of Recent increases in prices of Fuel on economic growth in Nigeria
  • 2.8 Business must pay attention to energy efficiency and create an active corporate energy strategy
  • 2.9 Effects of fluctuations of price of crude oil on the price of petrol at the local filling stations
  • 2.10 Theoretical Review
  • 2.10.1 Oil Revenue
  • 2.10.2 Agriculture resources

Chapter Three:

Research Methodology

  • 3.1 Research design
  • 3.2 Population of the study
  • 3.3 Sampling
  • 3.4 validity and reliability
  • 3.5 Instrumentation

Chapter Four:

Data Presentation, Analysis and Discussion

Chapter Five:

Conclusion and Recommendations

  • 5.1 Conclusion
  • 5.2 Recommendations
  • References

Chapter One


1.1 Background to the study

The aim of this project is to in-deptly looked into the adverse effect of fuel scarcity on farm produce as a case study in Ovia South East Local Government with a view to make known much to individual and the government on how much this development has taken it heavy toll on farm produce in both marketing and cultivation as well as how this trend can be put under control.

Until the early 70’s the main stay of Nigeria economy was Agriculture. Then the country (Nigeria) was fame for her proficiency in the production and exportation of groundnut, oil palm, cocoa beans, pepper, sugar cane, kola nut, bitter kola, cassava and so many other produce. These produce were known to be the only source of income to Nigeria.

Not until 15th January (1958) when oil was discovered in Nigeria specifically Okolobiri in Bayelsa state, this discovering of oil in commercial quantity brought about radical change in the economy of the nation (Nigeria) all other sectors seemed to have gone into extinction, indeed were abandoned therefore making the country to become totally dependent on crude oil for foreign exchange earnings, not agriculture anymore. But with about 166.2 million people in Nigeria today, it’s certain that man must eat, clothes himself and will also need to satisfy one or more needs from farm products. For agriculturalist to carter for these numbers by producing food for sales, and reserve for the next planting seasons, the practice of producing food in bulk in agriculture must change from mere subsistence farming system to mechanization. The term mechanization means the practice of agriculture by way of using modern machines to facilitate farm works and to maximize product within a short period of time.

It’s not gainsay to say that modern farm machines depends on fuel to function because our modern global food system is highly oil dependent even though petroleum is getting higher daily and becoming less and less affordable. And it’s also all true that virtually every operation in agriculture totally depends on machines.

According to normal .J. (2000) in a book titled “Eating oil” he said that the modern commercial farm miracle that feed all of us and much of the rest of the world is completely depend on the flow, processing and distribution of oil.
He further added oil refined for gasoline and diesel is critical to run the tractors, combines and other farm vehicles and equipment that plant, spray the herbicides and pesticides and harvest/ transport food and seed, and more also, it’s all true virtually every operation carry out in nowadays agricultural practice depends on machines beginning from bush clearing, wood feeling, soil plugging, harrowing, fertilizer application, harvesting, application of pesticides, grading of products transportation and so many others areas. If these aforementioned areas suffered west back as a result of fuel scarcity, you will agree with me that at the of the day, nothing will be done to produce food or farm product that will be equal to carter for the upsurge population, or if fuel that is supposed to be available and affordable to power these areas. Earlier mentioned is not easily gotten, or gotten at a very high cost, it’s certain that the little that will be produce at the end of the day as a result of fuel scarcity will now take it tolls on the selling price. Even the farmers that does rely on his strength to produce food for sale will equally have his own share of fuel scarcity as it will not go down well with the price of food production haven’t spent much money on transportation fro farm to the market is expected that this development will hike up the price of produce supplied to the market and this will in no doubt bring.

What is scarcity? According to Adams Smith (1989) define scarcity as the limited supply resources which are used to the satisfaction of unlimited want. With this, fuel scarcity can be defined as a limited supply of fuel which is used for the satisfaction of unlimited want.

According to Lionel Robbins (1990) scarcity as the fundamental economic problems of having seemingly unlimited human want in a world of limited resources. The event of 2nd January, 2012 substantiate the claim that fuel scarcity in no doubt is one of the greatest factor that triggered off the inflation of farm produce/products in the market today, following the pronouncement of the federal government of Nigeria that oil subsidy has been removed thereby bringing the price of fuel of 97 naira a liter as against the former pump price of 65 naira a liter. Few days after subsidy has been removed the price of produce/products skyrocket in which live, chicken that was sold between 1,500-2000, now goes for between 3,000-4,500 live goats that was used to be sold 7,000-8,500 is now sold for between 15,000-18000 while a bag of rice that was formally sold for between 6,000-7,500 now goes for between 12,000-14,000 likewise many other farm produce/products had witnessed tremendous change in price up till now, all that goes up, refuses to come down, and if the prove of fuel keep going up in the name manner, you will find out that almost all farm and agricultural produce/products will be price out of the reach of the common man and if nothing is done to check this situation on ground, certain the common man on the street and the entire society will soon be engulfed in hardship.

1.2 Statement of the Problem

In recent time, fuel scarcity has become a strong determinant of the price of produce/products of agriculture in the market, with this, it is important that the government should take a proactive measure in tackling fuel scarcity. Also, many people thing that it is because many young people has refuse to go into farming that is solely responsible for the daily increase in the price of food and other agricultural related products but this research seek to find out the adverse effect of fuel scarcity on agricultural products/produce and to suggest possible ways of profiling solutions on it.

Until the early 70’s, the mainstay of Nigeria economy was agriculture. Then the country was famed for her proficiency in the production of groundnuts hence the Kano groundnut pyramids, oil palm and the faster part of cocoa in the western part of the country. The discovery of oil in the country in commercial quantities brought about radical changes in the economy of the nation. All other sectors seemed to have gone into oblivion and indeed were abandoned thereby making the country to be totally dependent on oil for her foreign exchange earnings; not agriculture any more. All effort made since then to diversify the economy of the country have come to naught.

Expectedly the narrowing of the economy to a monolithic export commodity has its attendant drawback as oil by virtue of its importance to the economics of nations has inevitably become a subject of political manipulation. But the greater danger for Nigeria is that as a sole commodity of the nation and the inherent total dependency on oil has made the country’s economy revolve around it. Virtually all essential service rendered in the country revolves it. Almost all other sectors of the economy depend on oil .Any contemplation therefore of a possible scarcity or unavailability of the product will no doubt spell doom for the economy of the country (Sikkam, 2009).

The high cost of full price has paralyzed social and economic activities in and around Kogi State and as a result, there has been a noticeable hike in prices of commodities and products in markets. A market survey carried out recently in various parts of Kogi State such as Itobe market and Anyigba market showed that the high prices were occasioned by the scarcity of petrol.Building material markets at Lokoja and Okene have recorded a tremendous price increase of late. A glance at the prices show that building materials like the complete white bath tub which used to be N 9,375.00 in August 2011 now goes for N11,500.00 a bundle of zinc now cost N10,200.00 compared to N8,000 in August 2011. Also a glance at the food stuff market recorded considerable increase as a bag of rice that used to be sold for N7, 000 in 2011now sells for N9, 000.00 while Beans (brown) is now N6, 550 against N4, 500.00 in August 2011.Some of the market people spoken to attributed the increase to the removal of fuel subsidy which led to increase in fuel pump prices.

The researcher intend to identify some areas that the government should keenly look into in order to avoid fuel scarcity, such as constant deregulation of fuel products to every state steadily so as to make the product available and affordable for farmer who use fuel for carrying out farming activities, to severely fight against the division of fuel products by fuel marketer and to set out a severe penalty against those who indulge in vandalizing fuel pipe line, which reduces the target of the nation and to also put in place measure to avoid people working in oil producing company from going on strike.

1.3 Research questions

  1. Could there be a specific time of adverse effect on agricultural produce/products as a result of fuel scarcity?
  2. Does fuel scarcity affect the production of agricultural produce/products?
  3. Does fuel scarcity reduce the amount of farm produce?
  4. Does increase of transportation of food contributes to increase in selling price of food?
  5. Does modern agricultural practice depend on fuel?
  6. Does fuel scarcity increase the price of food?

1.4 Purpose of the Study

The main purpose of this study is to identify the problems associated with the increase in the price of agricultural produce/products in the market, its also met to identify ways to reduces this trend.

1.5 Hypothesis of the Study

  1. HO1: There is no significant relationship between the recent increases in fuel prices and Agricultural growth in Nigeria.
  2. HO2: Nigeria economy is not developing because of the effect of fuel price hike on purchasing power.
  3. HO3: There is no significant relationship between increases in pump price of petroleum and food security in Nigeria.

1.6 Significance of the study

This study or research will be of immense benefit to the government because if there is fuel scarcity. It then means that there will be increase in price of foods produce/products in the agricultural sector.

The study is hope to provide insight to the government as to why they should stop increasing the price of fuel, when the cost of fuel is low, the cost of production and transportation will also be low and these can lead to low price of agricultural commodities been transported.

More also, it is hoped that information gathered from this research will propel the government to ensure constant deregulation of fuel, stop increasing fuel, waging war against oil bunker and fuel hoarders, and to explore every means to ensure availability of fuel.

1.7 Definition of terms


Simple refers to the practice of tilling the soil for the purpose of growing crops and the rearing of animals for man’s use.


Means short supply of certain resources relating of demand at a given price.


Mean the practice of agriculture by using modern machines to carry out farm operation to increase production and maximize profit.

Agricultural Produce:

Refers to raw materials gotten from the farm (at it raw stage, not gone through secondary stage).

Agricultural Products:

Means agricultural produce that have passed through the raw stage to a second.


Means increase in cost of something.


Means to secretly store a valuable products or money for further use.

1.8 Organization of Study

The study is divided into five chapters. Chapter one deals with the study’s introduction and gives a background to the study. Chapter two reviews related and relevant literature. The chapter three gives the research methodology while the chapter four gives the study’s analysis and interpretation of data. The study concludes with chapter five which deals on the summary, conclusion and recommendation.

Chapter Five

Conclusion and Recommendations

5.1 Conclusion

Based on the findings, the study concludes that the agricultural effects, without auguring for or against subsidy removal are negative. The Government of Nigeria would have to consider these effects now or deal with it in the near future. The growth of real GDP has reduced because of the hike in the price of fuel in Nigeria. In addition, the rise in petrol price and the certainty of uneven prices across all 36 states of the federation, will add anywhere from 3 to 5 percentage points to consumer price inflation since 2012 to date 2014.Households’ income and spending have both been affected by the rise in petrol prices. More so the value of minimum wage compensation will depreciate further (assuming it is finally at N18, 000) combined with the increase in inflation. At the same time, the average household’s annual spending on energy goods and services will rise by about N75, 000, and their saving rate dropped sharply. The fall in the saving rate, will erode about half of Nigeria’s present middle-class citizens and further dampen the negative effects that higher prices would ordinarily have had on the economy in the short run. Consumer spending will be diminished greatly over the next few years, as citizens try to adjust and build up new savings.

Paying high prices for petrol and using less of it will affect the demand for goods and services. Nigeria is known more as a consuming nation than a producing nation. The few production industries In Nigeria will face a daunting challenge to stay in business (cost of production will go up and demand will drop).

The effects on demand, however, have by far the greater potential impact on GDP in the short run. In a perfect world, using less energy has only a small direct effect on production because, out of all the inputs to production (labor, structures and equipment, energy, and other raw materials), energy costs account for a relatively small share of output, but In the case of Nigeria, energy is a major share of output, as organizations have to provide for their own power inhouse, such as generators sets etc and are exposed to the market as it relates to energy prices with the subsidy gone.

The effects on demand and the consequent indirect effects on production—could be a much bigger problem, because spending more on petroleum imports and the nation’s poor power sector will generally reduces spending on goods and services in Nigeria while it will increase prices on virtually every good and service.

5.2 Recommendations

Based on the conclusion the following recommendations have been slated:

  1. Government should retain fuel subsidy while expediting the construction of the three proposed refineries.
  2. Fuel subsidy should be removed as soon as these new refineries are commissioned.
  3. The proposed rehabilitation of the existing refineries should be expedited.
  4. Government should vigorously pursue the revitalization of the railways. If only Nigerians had alternative to road transport, all this noise about fuel subsidy removal would not have been there.
  5. Private companies should be encouraged to start building refineries now with the assurance that subsidy would be removed before they start production.
  6. Government should embark on full deregulation of fuel prices to ensure market competitiveness.
  7. Government should outlaw or legislate against unauthorized dealership in the sale and distribution of petroleum products to reduce the hazards of extortion, unwarranted fire incidence leading to colossal economic loss and loss of life during periods of fuel scarcity and fuel price hike.

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