TIME SERIES ANALYSIS ON MONTHLY SALES OF PETROLEUM PRODUCTS IN NIGERIA FOR 30 YEARS (A CASE STUDY OF NNPC, Osun State)
1.1 BACKGROUND OF STUDY
The sales of petroleum products are the pivot behind the growth of the Nigeria economy.
The Nigerian petroleum industry has been described as the largest among all industries in the country. This is probably due to the belief that petroleum is one of the major sources of energy worldwide. The size, international characteristic, and role assumed by the petroleum industry were noted to have originated from the notion that petroleum is versatile as it currently satisfies a wide variety of energy and related needs.
Petroleum is the most vital source of energy, providing over 50 percent of all commercial energy consumption in the world. The revenues obtained from crude oil in Nigeria are of absolute advantage to expenditure commitments on various projects at the local, state, and federal levels.
The Nigerian economy relies heavily on the revenue derived from Petroleum products, as they provide 70 percent of government revenue and about 95 percent of foreign exchange earning. Apart from this, the contribution of petroleum to national development is many and varied; employment generation, foreign exchange earnings, income generation, industrialisation, and improvements in other economic variables.
The Nigerian economy is starkly dominated by the petroleum industry since the oil boom of the 1970s. Therefore, its economic growth and development also is dependents on the production and consumption of Petroleum product and hence, a close connection between the state and oil in Nigeria (Okunroumu, 2004; and Falegan & Okah, 1980). For instance, Wurthmann (2006) noted that oil accounts for about 40 per cent of Nigeria’s GDP, 70 per cent of federal government revenue and 92 per cent of its foreign exchange earnings. Also, daily domestic demand for Petroleum products stands at 530,000 barrels per day (bpd) which is 85,000 bpd more than the never-made 445,000 bpd installed refining capacity. As a result, Petroleum products supply remains an acid test for successive governments in Nigeria. With the inception of democracy in May 29th, 1999, the supply of Petroleum products has improved but not without a price – frequent increases in Petroleum products price yet demand of Petroleum product is still higher than supply (Sabo and Igwo, 2007:105). The effect of fuel scarcity is seen in the revenue generated from most of the NNPC stations in Nigeria as the monthly sales continue to fluctuate. The study in this regard wishes to carry out a time series analysis on monthly sales of petroleum products in Nigeria for 30 years using NNPC, Osun State as the case study
- STATEMENT OF THE GENERAL PROBLEM
What really instigated the study was due to inconsistency in the sales of petroleum products in Nigeria. Over the years, the frequent review of prices of petroleum products has gain a space in the heart of Nigerians, and most of the time, the out of stock of petroleum products at depot for sales is also rampart. In view of the above statement, the project examines a time series analysis on monthly sales of petroleum products in Nigeria for a period of 30 years using NNPC Osun State as the case study
- OBJECTIVES OF THE STUDY
The main aim of the research work is to carry out a time series analysis on the monthly sales of petroleum product in Nigeria for 30 years. Other specific objectives of the study include:
- to predict the total sales of petroleum products in NNPC Osun State in 2017
- to determine the effect of the sales of petroleum product for a particular month on the sales for another month
- to investigate on the factors affecting the sales of petroleum products in Nigeria
- to proffer solution to the above stated problem
1.4 RESEARCH QUESTIONS
The study came up with research questions so as to be able to ascertain the above stated objectives of the study. The research questions for the study are stated below as follows:
- What will be the total sales of petroleum products in NNPC Osun State in 2017?
- What is the effect of the sales of petroleum product for a particular month on the sales for another month?
- What are the factors affecting the sales of petroleum products in Nigeria?
1.5 STATEMENT OF RESEARCH HYPOTHESIS
H0: the fluctuation in the monthly sales of petroleum products has no significant effect on the annual total sales
H1: the fluctuation in the monthly sales of petroleum products has significant effect on the annual total sales
1.6 SIGNIFICANCE OF STUDY
The study on time series analysis on the monthly sales of petroleum product in Nigeria for 30 years will be of immense benefit to NNPC Osun, state, the federal government and the state government; the study will also be of great assistance to other researchers that wishes to carry out similar research on the above topic as it will disclose ways of predicting the next year total sales from the monthly sales of the previous years. The study will also contribute to the body of the existing literature on the monthly sales of petroleum products in Nigeria.
1.7 SCOPE OF STUDY
The study on time series analysis on the monthly sales of petroleum product in Nigeria will cover a period of monthly sales of petroleum products for 30 years (1987-2016)
1.8 LIMITATION OF 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 (Statistical bulletin).
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.
1.9 DEFINITION OF TERMS
PETROLEUM PRODUCTS: are materials derived from crude oil (petroleum) as it is processed in oil refineries