FUEL SUBSIDY REMOVAL AND WORKER ATTITUDE TO WORK IN NIGERIA (A CASE STUDY OF A SELECTED TERTIARY INSTITUTION IN CROSS RIVER STATE)
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CHAPTER ONE
INTRODUCTION
- Background to the Study
Nigeria is endowed with a wealth of both material and human resources. Nigeria’s primary source of income and foreign exchange prior to independence was agriculture. The revenues from other potential sources of income, such as agricultural and mineral resources, were investigated and used to fund and cover government expenses. Crude oil became the sole factor in determining Nigeria’s mono-economic status and the basis of all socio-economic transactions both inside and outside the nation as soon as the first oil field was discovered at Olobiri in the Niger Delta in 1956. The country possesses 28% of Africa’s proven oil reserves, second only to Libya; and is the largest producer of crude oil in the region, producing 2.4million barrels per day in 2010 which is about 24% of the continent’s petroleum (Siddig et al.,2014). The right pricing of petroleum products and the elimination of government subsidies on petroleum prices has grown to be complex and divisive matters of public policy. The question of whether to eliminate the subsidy has been debated by several administrations, including that of the present President, without leading to a widely accepted conclusion. After the last fuel subsidy was eliminated on January 1st, 2012, there was almost a revolution.
In Nigeria, the issue of appropriate pricing of petroleum product has always been a thorny controversial government policy issue for the past 30 years. Successive administrations, as well as that of the present President Bola Tinubu, have tried to solve this issue, but to no effect much like other. There appears to be no other universally acceptable solution to the teething problems because of the challenges that affect the populace political and economic maneuvers interact. Subsidy removal policies implemented by succeeding governments and the results of the action have detrimental impacts on the integrity of the regimes throughout Nigerian history. Subsidy is described as “the money paid by a government or organization to reduce the cost of providing services or producing goods so that their prices can be maintained” in the Oxford Advanced Learners Dictionary (1990). The key of having subsidies for goods and services in place is that it directly contributes to the decrease of poverty in the lives of the impoverished masses who could not pay high prices in light of the challenging circumstances that developing countries are facing as a result of globalization.
Reforming fuel subsidies is widely viewed as a chance to strengthen public budgets and promote long-term economic growth. The high amount of petroleum product subsidies and inefficient energy consumption are two major problems facing the energy markets in emerging nations that export oil. A government program called fuel subsidies was established to lower the prices that Nigerians must pay for petroleum motor spirit (PMS), automobile gas oil (diesel), and to shield the populace from fluctuations in the price of crude oil on the world market. The harsh fact of subsidies is that everything in Nigeria costs more as fuel prices rise at the pump. The goal of subsidizing fuel prices at the pump is to maintain a moderately high standard of life while making living expenses, manufacturing costs, and service costs accessible for all Nigerians. In addition to placing a strain on the budget, fuel subsidies increase the demand for fossil fuels and deter energy efficiency (Liu and Li 2011), which has a negative impact on the environment (Li, Shi, and Bin 2017), as well as fuel smuggling (Asian Development Bank 2016). Additionally, although being initially designed to aid the poor, the gasoline subsidy has benefited the rich population more. Only 7% of the subsidy’s benefits go to the lowest 20% of people, whereas 43% go to the richest 20% (del Granado, Coady, and Gillingham 2012). The catch with fuel is that while it is one of the main ways the federal government makes money, it also raises the standard of living and general well-being of Nigerians by subsidizing the price at the pump. In this situation, any little increase in the price of petrol at the pump without a palliative measure in place causes economic hardship for Nigerians and typically results in resistance and protest from organized labor, the civil society coalition, and the masses as a whole. The primary means by which Nigerians of average means benefit from the nation’s oil wealth is through fuel subsidies, which explains why (Campell, 2011). The government provides numerous subventions to enterprises to help them produce necessities that would otherwise result in costs that are blatantly out of reach for most people. Petroleum is the principal source of foreign cash in certain emerging nations, such as Nigeria, which has a mono-economy. The subject of subsidy adjustment is quite delicate. The primary goal or emphasis of this study is to discuss the socio-religious effects of Nigeria’s elimination of gasoline subsidies.
According to Reymond (2012) in toned that for many Nigerians, the removal of fuel subsidies is merely a symptom of deeper-rooted issues that exist within the system with a stagnant economy, high levels of corruption, little or no investment in health, education, or other social amenities, and weak infrastructure, it did not come as a surprise to the population. Due to its rapid industrialization and the dominance of fuel consumption in the industrial sector, Malaysia is now Southeast Asia’s third-largest energy consumer (International Energy Agency, 2015). Since all economic activities would use fuel based on market rates once the managed-float system for fuel pricing is put into place, those activities would be subject to highly variable costs. Domestic industries that use gasoline and other energy products in their manufacturing processes are burdened by high costs. As a result, industries with high proportions of fuel-based inputs would suffer a lot. Consequently, choices made about production operations will also be affected.
Increasing production costs are one effect of rising oil prices on commercial and industrial customers (Middle East Economic Survey 2016). For instance, the Saudi Cement Company in Saudi Arabia anticipated an increase in annual production costs of $18 million as a result of the elimination of fuel subsidies (Trade Arabia 2015). According to Rentschler, Kornejew, and Bazilian (2017), cost rises can occur both directly and indirectly, as evidenced by the rise in energy prices brought on by subsidy reforms. The cost structures of industrial companies that use a lot of energy significantly change, which has a negative impact on their profitability (Bazilian and Onyeji 2012). Such ramifications may have an impact on employment, economic activity, and ultimately, households (Kilian 2008). The output is decreased as a result of higher manufacturing expenses, even though companies can pass the cost along to their customers. Employment choices are further impacted by the fact that increased output is less desirable due to high production costs, which lowers the desire for employment. Since businesses have several options for mitigating and passing on price shocks, Rentschler, Kornejew, and Bazilian (2017) point out that cost increases (direct and indirect) may not always signify a loss of competitiveness. Low output and therefore low employment are initially frequently linked to high fuel prices. Furthermore, the high costs of goods and services deter government and consumer expenditure, which slows economic growth. Fuel subsidies frequently cause an unneeded shortage of fuel by increasing demand for fuel as a result of excessive consumption and waste brought on by the product’s lower price. In Nigeria, only a small portion of fuel is used in the production of most goods, so there is a weak correlation between fuel use and production. However, there is a strong correlation between fuel use and transportation because fuel is used for distribution, which raises the cost of goods at production’s end. Fuel subsidy influences the attitude of workers to work due to the increase in the cost of fuel leading to poor attitude to work.
The Nigerian government has documented and experienced terrible attitude from both public and private enterprises over the past many decades. This tragic event evolved into what it is today. The government has put a lot of effort into reviving this culture, but it has all been in vain. The level of negative attitudes toward working in corporations is a topic of great interest. Along with the economic advantages of better preparing employees for the one-of-a- kind demands of the contemporary workplace, there are also social advantages associated with increased performance, increased access to opportunities for post-organizational learning, Training and Development, and the establishment of stronger foundations for skills for lifelong learning. Guerreror and Sire (2000) said if a worker has a bad attitude toward work, it can lead to difficulties in implementing the prescribed job design, resulting in inability to meet organizational goals. The wonderful things in boosting the level of attitude have led to a focus on identifying the variety of variables that create poor attitude as well as understanding how these causes operate to limit or increase worker performance. Attitudes are formed as a result of learning experiences, or Attitude can also be established simply by following the example and opinions of coworkers, friends, and managers. This is mimicry or imitation, which is equally important in creating a negative attitude at work. According to Aremu (2003), a poor attitude is defined as a performance that is judged by the owners/customers and others to be below an expected standard. Employees in both public and commercial institutions have been shown to have a negative attitude. Workers’ terrible attitude has been and continues to be a cause of concern for owners, customers, and members of the community as a whole. This is due to the significant impact that employees have on the organizational growth of any formal institution. There is worldwide agreement on the declining standard of worker attitude (Adebule 2004). Shareholders are unanimous in their belief that their substantial investment in the organization is not delivering the desired dividend. Customers also complain about employees’ terrible attitudes both inside and outside of firms. Aremu (2010) emphasized that poor attitude not only frustrates owners and customers, but it also has far-reaching consequences for society in terms of a lack of workforce in all sectors of the business and politics.
It is blatantly obvious that the majority of employees display either good or negative attitudes as a result of various elements resulting from their workplaces. However, by implementing a variety of strategies that are supportive of these goals, organizations can improve performance by favorably affecting employees’ attitudes toward their work an internal drive. Additionally, it is clear that internal factors within an organization have an impact on its operations attitude. Employee engagement, commitment, and productivity are all significantly influenced by their attitude. It is thought that subjective rewards resulting from effective performance of a task provide intrinsic work motivation. In our today society it has being noted that fuel subsidy removal has really affected the working attitude of workers in the country. Fuel subsidy removal has being a great burden to salaries earners as it does not allow them to serve money as they should.
1.2 Statement of the Problem
Subsidies are vulnerable to corruption and the ever-present potential of fraud, particularly when subsidy payments are allocated. For example, the delay in reimbursing subsidies to fuel importers has provided incentives for importers to coerce payment. There have been multiple reports of high-profit rackets and “round tripping” of imported and domestic fuel. In the short run, removing fuel subsidies raises transportation costs and rates, which directly and indirectly affect the costs of physical distribution, material handling, marketing, logistics, and the attitude of worker to work in the country. In the medium range, citizens struggle to adjust to the emergence of market competition, and in the long run, market competition is predicted to lower fuel prices. But it is clear that the current administration completely eliminated gasoline subsidies without offering effective infrastructure or any other sources of energy that could all be used to replace fuel and improve living conditions. The government believed that abruptly eliminating the fuel subsidy was the best course of action for a better Nigeria, but the elimination of the fuel subsidy had a very detrimental impact on the populace both working and nonworking staffs as it affect their attitude to work. Subsidy removal is a policy in and of itself that is analytically grounded, economically sound, and politically acceptable, but it lacks social credibility and its sustainability will endanger the lives of the citizens due to the unprepared environment and peculiarities of Nigeria’s political office holders. It should be noted that under a government that knows what to do and how to do it, political office holders won’t have their own ways of influencing policy. Many debates have surrounded government retention to lapse fuel subsidy policy over the years. Because of the anticipated social and economic ramifications, attempts by the previous regimes to reverse retention of this policy have significantly sparked debate. Although the idea of subsidies is a noble one, there have been serious allegations of corruption (Ejumudo and Ikenga) and poor management regarding their implementation and management under the previous regimes (Ogwu, 2023). As soon as Senator Ahmed Bola Tinubu, the newly elected president, announced the planned subsidy withdrawal on May 29, 2023, prices for goods and the costs of services, including transportation, rose sharply. Motorcyclists also changed their fare. Artisans including welders, aluminium window filters and tailors, and market men and women who cannot afford power generators raised their charges for services rendered to their customers. Nigerian youths engaged in riding of commercial motorcycles and tricycles, and into street hustling just to keep body and soul together are now finding it very difficult to cope following the recent development. Adeyeye (2023) asserts that the new administration’s plan to do away with the fuel subsidy has unfavorable effects and, if improperly handled, could have no discernible economic gain. The administration sees the fuel subsidy as a government burden. Even still, the fact that a substantial sum of money was spent on subsidizing the importation of petroleum into the country means that the next administration must proceed in this manner. Inflation and the swiftly escalating costs of products and services provide further challenges. Due to fierce opposition from the Nigerian Labour Congress (NLC) to previous administrations who attempted the subsidy strategy, what the President Tinubu administration hopes to accomplish with its removal may conflict with peace and security. In the words of Omoniji (2012), “government workers, especially members of the NLC, engaged the government on negotiation, and whenever this fails, members always embark on strike action to express their dissatisfactions.” Young Nigerians, on the other hand, always respond to the withdrawal of fuel subsidy by protesting on the major highways. The central government lost millions of dollars, perhaps billions of naira, as a result of similar events in the past. Mass poverty is one of the key issues brought on by the government’s decision to end its program of fuel subsidies, as prices for products and services rose while public employee salaries stayed the same. On rare cases, it led to violent protests that shattered the calm and quiet. In 2012, abrupt increases in gas prices affected drivers who were heading back home after the holidays and the New Year. The black market saw a sharp increase in prices, which ranged from N170 to N200 per liter and between N140 and N150 per litre (Omoniji, 2012). Emeh (2012) claimed that Nigerians, particularly those in the NLC, reacted badly when former President Jonathan announced the discontinuation of fuel subsidies on January 1, 2012. The government suffered significant financial losses due to the strike action that ensued after this statement, amounting to over N100 billion. Additionally, it led to inflation, which raised the price of gasoline and other goods in stores. Furthermore, as prices for goods and services rose but people’s earnings stayed the same, the poverty rate rose. President Ahmed Bola Tinubu declared on the day of his inauguration that his administration intended to disregard the fuel subsidy policy that had been developed and put into place by the previous administrations, not caring about the customary responses that follow announcements of fuel subsidy withdrawal. The general public responded to the announcement, as has usually been the case. In addition, the cost of goods and services skyrocketed, endangering not only the existence of the impoverished masses but also traumatizing Nigerians across the board. Citizens oppose the current government’s reversion of the program, notwithstanding the fact that the policy’s execution has always been shamefully tainted by corruption. Over time, it is anticipated that the policy will be socially credible, environmentally appropriate, and sustainable, but some measures should be put in place to help the workers who rely on their salaries to survive and also keep their families going.
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