Complete Material Cost #3,000
Order for Complete Material now
ABSTRACT
This study takes a critical look at the impact of petroleum price increase on the price of food items.Food items are an essential commodity for a healthy nation, the supply of food to any nation must be done without any form of compromise as anything less than an adequate planning will lead to shortage in food supply which could affect the economy of the nation. Thus this research project is on the index number analysis of the effects of price of petroleum products on the price of food items between 2004-2013. The data used for this study is a secondary data. Both index number (relative price index) and time series (least square method) analysis were used to analyze the secondary data. The results from this study shows that, the price of food items is greatly influenced by the price of petroleum products and there exists a positive relationship between both. The study recommends that government should provide cheap and adequate supply of fuel as it goes a long way to mitigate food price inflation. Also, the government should create food supply centers and increase agricultural production by giving farmers softer loans.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Nigeria is blessed with abundant natural resources of which petroleum products are important factors in her domestic economy. According to Odularu (2008), Nigeria is the eight among the world’s oil producing countries The Nigerian economy is heavily dependent on petroleum products which account for over 95 percent of exports earnings and about 85 percent of government revenues (world Bank Report, 2010).
The effect of prices of petroleum products on food items and the economy of Nigeria cannot be over emphasized. Petroleum products range from aviation fuel, diesel to kerosene just to mention a few, this is solely due to the lack of diversification of the economy. 85% of Nigeria gross domestic product (GDP) is being accounted for by the petroleum sector (Mahmud 2009). Before the discovery of crude oil in 1956, agriculture was the main driver of the economy which has helped in the country’s development in these periods, there was hardly any incident to hike up products and services. The price stability of food items is of utmost important to every nation that wants to witness growth. This is because it is only a healthy work force that can give out their best in terms of work and productivity. Overtime there may have been some arguments about the relationship between petroleum prices and price index of food items. Some school of thoughts opined that prices of petroleum have nothing to do with prices of food items, questioning the agricultural stakeholders and traders for massive exploitation during price instability of petroleum products while the other schools of thoughts are of the opinion that petroleum products do affect the prices of food items. Petroleum is believed to have an enormous band wagon effect on the economy and even agricultural products, this normally occurs in the economies of the West Africa sub-region which isn’t often diversified. For any oil producing nation that doesn’t want to known poverty of its masses then they must have to diversify their economy so as to prevent crises in one sector of the economy spilling over to the other sectors.
Food items are an essential commodity for a healthy nation. The supply of food to any nation must be done without any form of compromise as anything less than an adequate planning will lead to shortage in food supply which could affect the economy of the nation. Every meaningful government should always ensure that adequate food supply is maintained as such shouldn’t be affected by price of petroleum.
1.2 STATEMENT OF THE PROBLEM
The fluctuation of agricultural food items in Nigeria has been a concern for sometime now which is not good for a growing economy like ours. A nation that plays with its agricultural sector is a nation that would encounter shortage of food supply which may not pan out for a populous country like Nigeria.the problem of hike of prices of good items each time there is a little upward change in the prices of petroleum products have led us to this study.
1.3 SIGNIFICANCE OF THE STUDY
This study would be useful to policy makers, researchers on the economy of the nation and above all the Nigerian governments in tackling the problems of food scarcity in Nigeria thereby ensuring food security in Nigeria.
1.4 AIMS OF THE STUDY
This study aims at providing a solution to the effect of petroleum prices on the price of food items.
The aim of this research work is also to establish a trend between the prices of petroleum products on prices of food items.
This study also has the aim of forecasting future trend and making recommendations.
1.5 OBJECTIVES OF THE STUDY
This research project seeks to study the effects of price fluctuation of petroleum products and how it affects or influences a corresponding change in price of food items in Nigeria.
This study also seeks to examine the nature of relationship that exists between petroleum prices and prices of food items in Nigeria.
This is also intended to predicting the effect of petroleum and food item prices on the economy of the nation.
1.6 RESEARCH QUESTIONS
What is the nature of relationship which exists between petroleum and food item prices?
What are the ways one can ensure food security in Nigeria?
Do the effects of prices of petroleum on the prices of food items have effect on the economy?
1.7 RESEARCH HYPOTHESIS
Ho: There is no significant relationship between the prices of petroleum products and the prices of food items.
Hi: There is a significant relationship between the prices of the petroleum products and the prices of food items.
1.8 SCOPE OF THE STUDY
This study is on the analysis of the effect of prices of petroleum products on the prices of food items from 2004-2013.
1.9 LIMITATIONS OF THE STUDY
Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection.
Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
1.10 SOURCES OF DATA COLLECTION
The data for this research project is a secondary data extracted from the published annual reports of the commercial bank.
The secondary source used in conducting this research was based extensively on documentary sources which are textbooks, journals, newspaper articles, paper presentations etc. also it involved publications of central bank of Nigeria and monetary institutions such as CBN bulletins, presentations, slides, commercial bank bulletins etc.
1.11 METHOD OF DATA ANALYSIS
Two types of analysis will be used to analyze the data in this research work. The first is the index number analysis and the second is time series analysis. Both analyses will be used to forecast the future price of food items.