Marketing Petroleum Products In Nigeria – Associated Problems (a Case Study Of Selected Independent Petroleum Marketing Firms In Port Harcourt)
Marketing Petroleum Products In Nigeria – Associated Problems
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The extractive / mining sector in Nigeria have, for past decades shown comparatively slow rate of growth and have been, in the main, predominantly foreign-dominated. This reflects a fact that the sector is both technology and capital intensive, requiring a high level of sophisticated, expensive equipment and expertise, which are in short supply in Nigeria.
The petroleum industry belongs to this sector but has, since the early sixties, out-performed its competing sub-sectoral industries, such as coal mining.
At present, the petroleum industry, is generally accepted as the pivot of the Nigeria Economy and the hub around which other sectors revolve, with revenue from oil and gas accounting for an estimated 30% of Nigeria’s domestic product (at current money prices), and for about 90% of the nation’s foreign exchange earnings as at mid 1991.
It is evident, from all the above, that the petroleum industry is clearly the most dynamic, vibrant and strategic sector of the Nigerian economy and has been the most significant sector of the Nigerian economy since she became an independent nation in 1960. (Dr. D.O. Egbuna, Understanding Refining and Petrochemicals Operation, Vol. 1).
Business features, irrespective of all the glamours, gains and aspiration have their attendant problems as well. These problems associated with the business comes in varied ways and takes different dimensions. The attendant problems may arise from logistical activities, inefficiency and mismanagement of the marketing mix. These problems plague the Nigerian oil sector in its efforts to market petroleum products.
The Nigerian National Petroleum Corporation (NNPC), markets refined products like:
• Premium Motor Spirit (P.M.S.)
• Dual Purpose Kerosene (D.P.K.)
• Automotive Gas Oil (A.G.O.)
• Low Power Fuel Oil (L.P.F.O.)
• High Power Fuel Oil (H.P.F.O.)
• Cooking Gas.
• Lubricating Oil, etc.
All these products are marketed by the multinational and indigenous oil companies like Exxon Mobil, Total Fina Elf, Agip, National Oil, Oando, African petroleum, etc. Despite the efforts of government aimed at efficient distribution of petroleum products; the problems of inadequate and uneven distribution among others still threaten the marketing of petroleum products today in the country.
As a result, these problems gave birth to independent marketers that served as a panacea to the prevalent economic situation occasioned by inadequacy in petroleum products distribution in the country.
Inadequate marketers therefore were granted rights to be involved in the industry as to bridge the gap created by distribution logistics, to ameliorate the sufferings of Nigerians. Entry of independent marketers became welcomed and justified, in the oil industry. Prior to the birth of the independent marketers, petroleum products distribution was epileptic and unreliable.
Therefore, the shortage experienced in the country of petroleum products in 1974 and 1975 were attributed to the inadequate distribution network for petroleum products.
Government therefore responded to these problems in two ways:
It encouraged Nigerians with resources to engage in petroleum products marketing and build more depots to bridge the lapse created by distance and problem of transportation.
Presently, a law on pipeline vandalization had been enforced to deter pipeline vandals from the havoc so caused. Also, task force have been put in place to ensure that petroleum products reach their destination without diversion.
Also, possible recommendations are made to solve the problems so identified.
The study therefore covers mainly some specific petroleum products like diesel, kerosene, premium motor spirit gasoline and domestic gas, which are commonly used in domestic and economic life more than other products of petroleum (crude oil).
1.2 STATEMENT OF THE PROBLEM
The participatory and regulatory rate of the government in which marketing of petroleum products have yielded good result but its effects to equate demand with supply of these products within her frontiers has proved abortive.
Distribution pattern of petroleum products in Nigeria has received increased attention, since diesel, kerosene, gasoline are described as one of the bedrocks of the Nigerian economy.
However, there are pertinent problems witnessed in the marketing of petroleum products in Nigeria. One of such problems is the location of depots: some parts of Nigeria are far from the source of supply of these products and therefore experience acute shortage of the products.
Also, there is problem of shortage (i.e. inability of supply to equate demand) during festive periods e.g. Easter, Christmas and New Year, during these periods, there is always excessive usage culminating into increased demand for petroleum product.
Other problems militating against the distribution of petroleum products include: transportation, frequent power failures, inadequate storage and refining capacity, finance inadequacy, poor channel of distribution, tidal waves, activities of thieves / vandals, uniform pricing, massive struggling, unforeseen strike action, shortage of spare parts, etc.
Studies have come up with above listed problems generally affecting the marketing of petroleum products, and no specific study has been carried out on petroleum products which is commonly used such as kerosene, gasoline and diesel. This study is therefore focused on the identification of problems in marketing the petroleum products under reference and possible solutions being given towards solving them.
1.3 PURPOSE OF STUDY
In spite of the acclaimed progress made in management of various aspects of petroleum products, the maximum potential of the industry is below capacity and standard.
As a result of this short fall in capacity levels, the industry is yet to realize the object of its mission in the country.
This unaccomplished mission is evident especially when looking critically into various problems relating to the oil industry in the country. Prominent among these problems is the ineffective marketing of petroleum products.
The aim of this study therefore is to identify the problem in the marketing of petroleum products and an attempt to determine ways of solving such problems looking critically at some activities involved.
This study attempts to accomplish the following:
(1) Determining the factors that influence the policy on establishment of retail outlets in urban and rural areas.
(2) The adequacy of distribution channels in the country.
(3) Studying the policies of various marketing firms in granting franchise rights in setting-up outlets.
(4) Determining policies relating to development and selection of their distribution channel and the extent of control over these channels.
(5) Analyzing specific activities of the various dealers, identifying their problems and determining role as it relates to products scarcity and availability.
(6) Determining the effect of uniform pricing in the marketing of petroleum products.
1.4 SIGNIFICANCE OF STUDY
The significance of this study is viewed from the fact that petroleum is the bedrock of our economy.
Therefore, the economic importance of marketing petroleum products attracts government bodies, institutions, general public, international oil companies as well as independent marketers.
The information generated by this study would help the government carry out a more purposeful and result oriented planning, control and evaluation of the petroleum industry with a view to enhancing its contribution towards improving the Nigerian economy.
Also the benefits derivable from this research work by the researchers and the consuming public points to the significance of the study.
(1) This work: Associated Problems in Marketing Petroleum Products in Nigeria, A case study of Product Pipelines and Marketing and other independent marketing firms is in partial fulfillment of the requirement for the award of Higher National Diploma (HND) in Marketing.
(2) The work will further expose the researcher to problems militating against petroleum products in Nigeria and possible ways to ameliorate these problems.
(3) For the producers, this study would educate them on tier perception of end uses of petroleum products, pricing policy, effectiveness of the distribution network and the need to maintain or improve their logistics of the products distribution.
(4) The dealers and various oil companies through this study and findings would know what customers want in terms of services offered and the availability of products as and at when required.
(5) Finally, this study would encourage the use and application of marketing research as a tool for business decision-making.
1.5 ASSUMPTION OF THE STUDY
The following assumptions are inherent in the study:
(1) Petroleum products are unevenly distributed in Nigeria.
(2) The uneven distribution is owing to a number of factors, some of which are obvious and some are non-obvious (not apparent to the consuming public).
(3) Kerosene, gasoline and diesel are the products mainly focused on in this study.
(4) Petroleum products forms the bedrock of the Nigerian economy, thus every questionnaire respondent will answer objectively, as it affects him/her.
1.6 RESEARCH QUESTIONS
The purpose of the study is to determine the associated problems in marketing petroleum products in Nigeria. Based on the purpose of the research stated above, the following research questions have been formulated:
(1) What are the associated problems in marketing petroleum products?
(2) How does irregular supply of petroleum products affect the economic life of Nigeria?
(3) To what extent does transportation affect economic activities in the country?
(4) What extent does location pose a problem to petroleum distribution in the country?
(5) How does lack of storage facility slow down activities especially during shut downs, and maintenance periods?
(6) To what extent does a good channel of distribution help to sustain the economic activities in the country?
(7) How does the implication of uniform pricing of petroleum products impact the economy?
(8) How is government interference in regulation of petroleum products distribution viewed by the consuming public?
The following hypothesis formed the basis for this research study. The hypothesis shows the position or opinion of the researcher in his attempt to express the subject of this research work.
Though, these are subjective; their authenticity, validity, or otherwise will be tested in the process of this work.
1. Ho: The problems of frequent power failure, inadequate
storage facilities and transportation does not hinder effective marketing of petroleum products.
2. Ho: Inadequate finance, uniform pricing does not impede
proper marketing of petroleum products to final consumers.
1.8 THE SCOPE OF STUDY
The term ‘Petroleum Products’ is generic and so wide that a study embracing all the petroleum products would extend beyond the scope of this work in terms of time, financial involvement and technical expertise required.
According to Cassidy (1954), there are about two thousand, six hundred (2,600) petroleum products. Therefore, considering this wide range of products available. This work will be delimited and constricted mainly to problems facing distribution of kerosene, gasoline and diesel. The choice of these products is based on how the domestic economic life of the country is controlled basically by these three products – kerosene, diesel and gasoline.
The study of problem facing the distribution of these major three products (kerosene, diesel and gasoline) is necessitated by the heavy dependence of automobiles, industries, plants and machines as well as reliance of households on them for cooking, lighting and sometimes as first aid.
This work therefore under study Pipelines Product and Marketing Company (PPMC) and some few independent marketing firms in Port Harcourt.
1.9 DEFINITION OF TERMS
Definition of terms used in this work becomes imperative, in order to reduce ambiguity and semantic problems that are associated with the professional parlance, and in the context, which they are used.
Below are terms use din this study, with unique manning, subjected to varied interpretations are defined as follows:
ASSOCIATES: According to Oxford Advanced Learners’ Dictionary of English, 6th Edition (2000); Associated means connected; if two things are connected because they happen together or one thing causes the other.
PROBLEMS: According to same dictionary above; problem means a thing that is difficult to deal with or to understand. Encyclopedic Dictionary (1989) defines ‘problem’ as any question or matter involving doubt, uncertainty, purposed for solution or discussion.
MARKETING: Defined as a process of planning and executing the conception, pricing, promotion and distribution of ideas goods and services to create exchanges that satisfy individual and organizational objectives. American Marketing Association (1985). In this work, marketing basically describes, distribution and selling of petroleum products to consumers.
PRODUCT: In principles of marketing by P. Kotler / G. Armstrong (6th edition), product is defined as anything that can be offered tot eh market for attention, acquisition and satisfaction of need or want. Usually the word product suggests a physical object, such as car; however, the concept of product is not limited to physical object, but anything capable of satisfying a need. For the purpose of this work, product is narrowed down to petroleum products such as kerosene, diesel and gasoline, etc.
DISTRIBUTION: In the scope of this work, the definition of distribution shall be limited to; a process of ensuring products availability at the reach of the consumers.
DISTRIBUTION CHANNEL: Defined as a set of interdependent organization involved in the process of making a product or service available for use or consumption by the consumer or industrial user. Channel of distribution of petroleum products within the country are primarily; road, pipeline and vessels.
PIPELINE: Involves movement or transportation of petroleum through pipelines laid from refineries to designated depots in strategic states across the country.
ROAD TRANSPORTATION: Movement of petroleum products by roads through trucks and tankers.
VESSELS: Implies movement / transportation of petroleum products in water through a craft, often involving carriage in barrels.
CRUDE OIL: Organic (i.e. fossil) deposit / concentration found many kilometers deep in the soil. It is otherwise called petroleum.
OIL EXPLORATION: Deliberate search for crude oil deposits using geological and geophysical techniques by experts.
OIL DRILLING: Tapping the resources of oil deposits.
THE BIG EIGHT: The traditional oil marketing multi-national companies in Nigeria viz: Mobil, National, Unipetrol, African Petroleum, Agip, Texaco, Total and Elf marketing. Over the years, many have merged and changed names such like: Total Fina Elf, Exxon Mobil, Oando, etc.
INDEPENDENT MARKETERS: These are sole proprietors encouraged by the federal government under the independent marketing scheme to take part in the marketing of petroleum products in Nigeria.
2.0 LITERATURE REVIEW
The study is concerned with problems associated with the distribution of petroleum products in Nigeria.
This basically traces the roots back to the background (historical) and the problems, up till the present day.
HISTORICAL BACKGROUND AND PROBLEMS
Oil refining activities in Nigeria could be said to have originated from the small clause inserted in the oil prospecting and mining licence, granted by the Federal Government of Nigeria to Shell-BP in 1954, to the effect that a refinery should be built in Nigeria as soon as oil production hit 500,000 barrels per day.
That clause eventually led to the commissioning of Nigerians Premier Refinery at Alesa – Eleme, near Port Harcourt in 1965, with initial capacity of 35,000 barrels per stream day (bpsd), later increased to 60,000 bpsd, in 1972. That refinery, originally known as Nigerian Petroleum Refining Company (NPRC), owned jointly then by Shell, British Petroleum and Federal Government of Nigeria, came under the full control of NNPC in 1984, as a consequence of a formal dissolution and assets – transfer exercise.
Soon after the cessation of the Nigerian Civil War in the early seventies, the subsequent oil-judled economic boom led to high and rapidly increasing domestic demand for petroleum products.
This situation compelled the Federal Government, acting through the NNPC, to make substantial additional investments in new oil refining facilities, leading to the Warri, Kaduna and new Port Harcourt Refineries, which were commissioned in 1975, 1980 and 1989 respectively.
As at the end of 1992, the total installed capacity of the four existing refineries was 445,000 BPSD, accruable as follows:
(1) Old Port Harcourt Refinery, now merkeged with (2) — 60,000
(2) New Port Harcourt Refining Company Limited————150,000
(3) Warri Refining and Petrochemicals Company————-125,000
(4) Kaduna Refining and Petrochemicals Company———- 110,000
The corresponding total demand, in domestic consumption of refined products, was established at about 300,000 barrels per day.
2.2 EARLY MARKETING AND DISTRIBUTION OF PETROLEUM PRODUCTS IN NIGERIA
Another aspects of downstream operation, which does not fall within the realm of refinery activities, but deserves mentioning here is the marketing and distribution of petroleum products.
Before 1923, the pricing of petroleum products was in the hands of oil marketing companies. Prices of petroleum products were determined at the point of sales, this implied that consumers in hinterland had to pay a lot more than their counterparts along the coast, especially Lagos areas.
In 1973, government introduced the uniform pricing policy effected throughout the federation. Government also established the petroleum equalization management Board, which made companies pay for over or under supplies in any given zone.
Prior to the inception of Warri and Kaduna refineries, there were acute shortages of petroleum products; arrangements were made with off-shore refineries to refine Nigerian crude oil abroad and bring in the products. Due to inadequate facilities for the receipt of the imports coupled with a poor distribution network, government efforts did not yield high dividend – the role played by the major oil marketing companies did not support the good intention of governments.
The appointment of independent marketers was to break the monopoly enjoyed by the marketing companies, at the expense of consumers.
Refineries pumped petroleum products (petrol, diesel and kerosene) to the depots situated in almost all parts of the country for effective distribution.
It is worth mentioning that prior to the uniform pricing policy, there was no element subsidy on petroleum products. When government fixed prices in 1973, it introduced a subsidy element of 35.7%, based on crude oil price at the time.
Until this period, the marketing and distribution of petroleum products were entirely a private sector affair. The private marketing companies could not cope with the increased domestic demand for products and this resulted in severe shortage of petroleum products all over the country. This also constituted a major drawback to the development of the country.
This situation prompted government intervention, which manifested in the construction of extensive pipeline network, massive oil depots (storage depots) and active participation in transportation and distribution of petroleum products effectively.
Table below shows the big eight (8) with their retail outlets as at September, 1980.
Companies Number of retail outlets
Source: This Week, September, 29th, 1986.
Some of these companies have changed name, merged and increased number of retail outlets presently.
In order to “Nigerianize” the oil sector, the federal government bought majority of equity shares in the former foreign companies and encouraged enterprising Nigerians with enough capital to establish oil marketing companies. This exercise was implemented under the “independent marketers scheme”.
Presently, about three hundred and seventy (370) independent oil marketers are involved in the marketing of petroleum products alongside with the big eight (8).
Source: National Concord Thursday, July 16, 1981.
Nigerian National Petroleum Corporation, Petroleum Exploration and Development in Nigeria P. 8
2.3 MARKETING CONCEPTS AND STRATEGY
Numerous definitions of marketing have been suggested by a number of authorities, companies, institutes and scholars. In some cases, the emphasis has been on either the activities of marketing or the concept applied. In practice, it is clear that the two are interdependent, therefore where the concept is understood, the activities follow a natural sequence, but where the concept is not understood, then the activities may be misdirected and ineffective.
Hughes (1978) defined marketing as these activities that relate an organization successfully with its environment. The main activities are the identification of unfulfilled needs, the development of products and services to meet these needs, pricing the distribution of goods to the market place and the communication of the ability of these products and services to meet needs.
Mentzer and Schwarts (1985: 4-5) as in Olakunori (1999: 14-15) defined marketing as consisting of activities performed by individuals or organizations for commercial and non-commercial objectives, aimed at satisfaction through the exchange process of buyers demand for products, services, people and ideas.
Kotler (1994: 13) defines marketing as a social and managerial process by which individuals and groups obtain their need and want through creating, offering and exchanging products of value with others.
This definition will be viewed from three perspectives. Firstly marketing is a managerial process, it takes a systematized step-by-step method to find, identify need and wants of individuals, this by implication involves a research process.
Secondly, the activities of marketing, after identifying the need, seeks to create a need/want satisfying product (goods and services), and offer it for attention and acquisition.
Following the acquisition, marketing is directed at facilitating and consummating exchange. Exchange can cover both the pursuit of profit transactions and exchange relationships. While transaction refers to a short exchange with no implications of a more durable relationship sought. Exchange relationship refers to the establishment of a continuous relationship of exchange.
Finally, the definition deliberately avoid specifying what products are being exchanged for. Traditionally, the subject of exchange has been goods and services for money. Essentially, things of value are being exchanged. In order for the definition of marketing to be made more contemporarily relevant, it should be wide enough to cover various things of value that might be exchanged, among which are; goods, services, money attention, devotion, energy and time to mention a few.
Plato (1967) opined that petroleum products marketing is that part of management activity which seeks to direct the flow of petroleum products profitably to selected customers. He went further to say that marketing approach adopted in the petroleum industry involve basically four (4) steps viz:
(a) Research to determine customers and prospects, requirements (needs).
(b) Designing new services to old customers following research findings.
(c) Marketing petroleum products or services to customers for whom they were researched and designed (this includes promotion and distribution).
(d) In satisfying the customers’ needs with the above concepts in mind, it is pertinent to note that while the petroleum products users want varieties of petroleum products at different times, they are equally interested in the performance qualities of the products in the respective areas which they are channeled.
Bell and Emory pointed out that marketing concept has three basic elements thus: customers concern, integrated operation and profit reward.
Integrated operation considers the entire business as a tool of operation system with the consumer and social problems taking precedence over operational considerations in all functional areas.
Stanton (1981) deposited that marketing concept is the philosophy of business which states that the consumer needs / wants satisfaction is the economic and social justification for a firm’s existence. Consequently, all the company’s activities must be devoted to finding what the consumers want, and doing thus; making profit over the market at the long run must never be over-looked.
Kotler (1972) states that marketing concept is a consumer orientation backed by integrated marketing aimed at generating market consumer satisfaction as the key to satisfying organization goals.
Kotler (1972), Bell and Emory are seen to be saying almost the same thing, because what Bell and Emory pointed out about marketing concept are all enshrined in Kotler’s definition.
The marketing concept calls for a basis re-orientation of the company from looking inward to identify customers’ needs.
Levitt (1960) stated that “selling” focuses on the needs of the seller; marketing on the needs of the buyer.
The history of marketing shows a strong movement away from the simple concept of selling towards one of programmatic planning of product, pricing, promotion and distribution to responsively serve the interest of target customers and society as a whole.
Discussing the marketing concept also brings into focus the concept of marketing mix strategy.
Kotler (1972) opined that marketing mix is the right combination of the firm’s marketing decision variables at a particular point in time. The firm’s marketing mix can be conveniently represented by “PADR”, commonly known as 4P’s.
P = Price
P = Promotion (Advertising and other promo-tools).
P = Product (Quality and Standard)
P = Place (Distribution).
Also, marketing strategy is “a set of objectives, policies and rules that guides over time, the firm’s marketing efforts, its level, mix and allocation, partly in response to changing environmental and competitive conditions”.
Rachman 91972) sees marketing mix as a term used to describe the blend of decision about product, price, promotion and place. It must be said that decision acts on each other while they are being mixed together. Example, a decision on product quality will affect the decision on the pricing of the product.
The center point of marketing mix concept described so far has identified product offerings as one of the basic factors that attract customers’ attention. It is this product that every producer tries to conceptualize into what the customers desire, so as to satisfy their needs. This means that in determination of what products should be offered, such factors as product quality, safety features, packaging, labeling, brand names, etc, should be considered. This is called product concept.
Kotler (1980) in discussing marketing management philosophies, identified the product concept as a management orientation that assumes that consumers will favour those products that offer the most quality at the ruling price and therefore the organization should devote its energy towards improving products quality.
Levitt (1975) holds the view that the definition of “product” does not come from its generic essence, but from the problems people are trying to solve with it. He cited an instance of the petroleum industry; that it is not the generic virtues, that they extol, but more likely the use to which they are put, to enhance users’ satisfaction.
Petroleum products are used in various way e.g. the Dual Purpose Kerosene (DPK) used for jet planes as well as for domestic cooking and lighting; also the Automotive Gas Oil (AGO) used as lubricant in automobile industries.
The above therefore shows that, the satisfaction derived from using these petroleum products emanates efficiency envisaged from the respective uses they are put into.
Roseberge (1974) looks at the total product as having a three dimensional chrematistics viz: explicit, implicit and external. Roseberge sees the explicit characteristics from the managerial perspective, which relates to such aspects as brand, packaging related services, core specification and product life cycle. From the consumer point of view, implicit characteristics relate to what the product symbolizes, what it communicates, how the consumer perceives it, its usefulness and the satisfaction derived.
External characteristics are akin to such questions as whether the product has an adverse effect on the user and the society as a whole and the resources (raw materials) used for its production as they affect the society.
Distribution is another aspect of the marketing mix designed to get the product to the reach of the ultimate consumers.
Nwokoye (1981) defined a distribution channel as the combination of the institutions through which a seller markets his products to the ultimate buyer.
Elvy (1972) sees the choice of distribution method adopted by any industry as dependent upon many factors and feels that marketing managers should weigh their products properly before deciding on which distribution policy to adopt.
He further stressed that the success of one’s marketing plans depends upon the choice of the right distribution methods. In this case, several factors are to be considered before adopting at particular distribution pattern. These are:
(a) The nature of the products to be marketed.
(b) The scope of the market it intends to penetrate.
(c) The distribution pattern which currently exists for this class of product.
(d) The production cost for the product.
(e) The size of existing sales fore.
(f) The amount of advertising appropriation to be devoted to the product.
(g) The pricing policy it is intended to adopt.
(h) The company’s existing transport and storage facilities.
(i) The company’s financial resources.
The distribution pattern adopted in marketing petroleum products should not expose them to any chemical reaction, as they are high inflammable. Also the storage system should be mainly underground.
The scope of the market for petroleum products is large and geographically dispersed. The purchase of petroleum products is seen in terms of the various oil companies, independent marketers and other oil dealers that are involve in the distribution of petroleum products across the country. NNPC has no sales force in the distribution of petroleum products in Nigeria, but at present (2005), they have floated a number of NNPC mega stations, the administration of Engr. Fursho Kupolokun, GMD of NNPC (Source: NNPC News Bulletin, Vol. 26 No. 1 Jan. 2005).
Since petroleum marketers enjoy oligopoly, there is no need for much promotion, except for precautionary measures by the users of petroleum products and very small promotion by oil companies and independent marketers to enhance their competitive position in terms of their branch name.
Petroleum products enjoy uniform price system across the country; subsidy is however granted to the oil marketing companies to compensate for the variations in their cost of operation.
Also NNPC enjoys a sound financial backing from the federal government, since it is a federal corporation, while other oil companies source for finance themselves.
Corey (1976) identifies distribution system, as a key external resource that took years to build and it is not easily changed. The construction of oil pipelines that link various depots in the country is a case at hand to prove this point.
These pipelines supply petroleum products to various states and depots from the refineries, across the country.
He further said that distribution represents a significant corporate commitment to a large number of independent companies whose business is distribution and to the particular market they serve.
The independent companies in the distribution of petroleum products are the oil companies and dealers who help in the distribution of products from various zonal depots to all localities of the nation to the reach and satisfaction of consumer needs.
Bucklin (1966) identifies distribution as a process whereby every producer seeks to link together the set of marketing intermediaries that best fulfils the firm’s objectives. This set of marketing intermediaries he called – the marketing channels. Eh reiterated that a channel of distribution should be considered to comprise a set of institution, which performs all the activities needed to move a product from the point of production to consumption.
3.0 RESEARCH METHODOLOGY
In the preceding chapter, a literature review was written to highlight the prominence of basic concepts associated with the topic, which will also guide the study.
This chapter is therefore designed to present the methods used in this research work. To facilitate better understanding of the methods, the study was further sub-divided into the following headlines: design of the study, area of study, population for the study, sample of the study, source of data, determination of sample size, etc.
3.1 DESIGN OF THE STUDY
Research design is a framework or structure used as a guide in data collection and analysis for a study. This research is descriptive in nature, as it attempts to explain the various parameters used in measuring the problems associated with marketing petroleum products in Nigeria, particularly Rivers State (PPMC and other independent markets).
The technique used in defining the design of the study is the simple random sampling.
3.2 AREA OF STUDY
This study was carried out in Prot Harcourt, Rivers State of Nigeria, and Pipelines Products and Marketing Company, (PPMC) together with major independent marketers were used as case study.
3.3 POPULATION FOR THE STUDY
Population for this study consisted of all petroleum products marketing firms in Port Harcourt metropolis.
Owing to the numerous number of service stations in Port Harcourt, we therefore limit our population for this study to only fifty (50).
This constituted the total population of this study to reduce biased and error in judgement.
3.4 SAMPLE OF THE STUDY
Sample of this study consisted of ten (10) independent marketing companies of petroleum products in Port Harcourt metropolis together with PPMC.
Simple random sampling technique was used to select ten (10) out of the many petroleum-marketing firms in Port Harcourt.
Below is a list of the firms, selected as samples.
(2) NNPC (Mega station)
(7) Con oil
(8) Elf Petroleum
(9) Dan Dollars
(10) Ekonoh oil.
SUMMARY OF FINDINGS
Findings abound in this research work, which were brought to bear from responses got from questionnaires distributed and retrieved.
Important among many of the findings, will be summarized below, most of which had been analyzed in the preceding chapter (chapter 4). These findings were not only responses elicited from questionnaires’ respondents, but also comprised of interviews and personal observations of the researcher.
Foremost among other findings, is the problem of transportation. Costs occasioned by deteriorating, and poor road networking, coupled with high fuel prices itself contributes to the problems associated with distribution. Besides these, the cost of trucks / tankers, the terrain of the state; also hinder successful distribution of products. Thus, in spite of the uniform pricing stipulated by government, there abound cases of variations in pump prices, which compounds the problem distribution.
Storage facilities’ inadequacy is another underlying finding. Analysis on this factor points to the truth that most service stations do not have storage facilities with capacities that could service the need of consumer for a considerable length of time. Thus they run-out of stock intermittently, causing untold hardship to consumers and general public due to irregular supply.
Depots are not evenly and strategically located in most parts of the country; this constitutes logistics problems faced by distributors who would have to travel distances to get products from depots.
Locations of filling (service) stations are not sited conveniently to the consumers reach, and the few in operation are not adequate to meet the increasing need of the growing populace. Since location is not one of the pre-requisite to become a dealer, rights of operation are granted to dealers, irrespective of where and how the station is located.
Productivity, also poses a problem; given the three refineries located at Port Harcourt, Warri and Kaduna respectively; demand still exceeds supply, such that crude is being exported to be refined outside the country, and so the cost of freight and refining outside the country, leads to increased pricing which impacts negatively on the economy; this is occasioned by the dilapidated standard of the refineries, whose refining capacities per day cannot cater for the increasing need of the consumers in the country.
Finally the activities of vandals, who dangerously bore holes on pipelines bearing petroleum product in order to steal the “gushing” product, also result in loss of production time. Apart from the possibility of fire outbreak, these nefarious activities lead to waste of valuable production time in “flushing” the lines to “gas free” them before any welding repairs can be carried out.
This delay on production and the fuel shortage leads to increased distribution problems.
In this study, examination was made of the problems encountered by marketers of petroleum products in Nigeria using Port Harcourt as a case study.
The result of this study among other things, indicate that; the existing channels of distribution needs to be effectively managed and controlled to ensure proper distribution to the reach of consumers.
Uniform pricing should be regulated adequately to avoid pump price variations (fluctuations) and artificial / induced scarcity of the product at times when demand is high; marketers who tend to exploit the “increasing demand” situation by undue price hiking, should be reprimanded to deter future perpetrators.
Product differentiation should be in the form of service added to petroleum products consumers. Consumers desire to obtain this product from the closest / nearest service station with convenience and minimum delay; indicates the inadequacy of service stations and the need for them to be strategically located. In addition, depots should be established in more states of the federation.
To forestall any impromptu shortage of petroleum products resulting from the routine turnaround maintenance exercise of the refineries, NNPC should embark on establishment of service stations, which will aid direct distribution, thus enhancing free flow of products to final consumers at a stipulated price.
Activities of oil marketing firms and independent marketers should be closely monitored, with respect to efficient flow of petroleum products in the country, additionally, responsibility for safe and efficient operation and maintenance of the depots nation wide should be ensured, by the constituted authority. As oligopolist market, the PPMC does not embark much on promotion. Little promotion is done by individual oil marketing firms to attract brand loyalist. NNPC and particularly P.P.M.C. should as a matter of urgency, launch an enlightenment campaign or use any avenue to educate its present and potential consumers on the danger of misuse or misappropriate of petroleum products, because the present state of “CAVEAT EMPTOR” is most unacceptable, the diction should be “CAVEAT VENDITOR”.
Finally, the ever-increasing petroleum pump price should be regularized, to encourage stability of the Nigerian currency and economy in general.
This to a large degree, will encourage investors into the country and ameliorate the problems of petroleum distribution in the country, thus improving the living standards of the Nigerian populace.
Based on the findings of this study and conclusions drawn from it, the following recommendations are made to curb the problems of marketing petroleum products in Nigeria.
(1) Government should increase the numbers of depots in the country to ensure effective distribution of petroleum products.
(2) Uniformity in prices of petroleum products should be continually enforced. This is necessary to regulate the activities of illegal petroleum dealers.
(3) Corrective measures and penalties should be defined against hoarding, black-marketing, bunkering of petroleum products as well as vandals of petroleum pipelines. The penalties should be enforced to the latter so as to deter illegal and nefarious activities.
(4) Multinational oil marketers and independent marketers should be given equal treatment. This create cordial and letter relationship between government and dealers.
(5) While marketers should ensure increased supply through acquisition of tankers and trucks; government should provide infrastructural facilities (e.g. roads network) to enable product distribution.
Aside these, loans and subsidy should be granted to independent marketers to aid their expansion.
Please tick () or (x) in the spaces provided, again one of the options you consider appropriate.
(a) Sex: Male Female
(b) Age bracket:
(i) Under 18yrs
(ii) 19 – 30yrs
(iii) 31 – 45yrs
(iv) 46 and above
(c) Educational level:
(i) No formal education
(ii) Primary education
(iii) Secondary Education
(d) Marital status: Single Married
1. Name of establishment ————————————————-
2. How long has your establishment operated in this area?
(a) 1 – 4yrs
(b) 4 – 10yrs
(c) 10 and above
3. Which of these petroleum products do you market?
4. What is your source of fund for the business?
loan from bank
All of the above
Others (specify)———————————————————- 5. Who is your supplier?—————————————————
6. Is the supply regular and reliable?
7. If answer to Q.6 above is No, mark the box below for reasons: Scarcity fo product
Inablity of refineries to meet demand
8. Does your firm experience transportation problems?
9. How many stations does your organization operate?
(i) 1 – 2
(ii) 3 – 5
(iii) 6 – 8
(iv) 9 and above
10. Is the number of stations adequate to meet demand?
11. Are you able to service your customers’ needs all year round?
12. If answer to Q.11 above is No, will you welcome any assistance to expand the capacity of your service station?
13. Are there storage problems encountered?
14. What requirement did you meet to become a dealer?
All of the above
15. Do you think that the number of service stations in the country is enough?
16. What channel of distribution does your firm adopt in ensuring availability of petroleum products?
17. How is the channel controlled?
Through: Channel captains Channel members
18. Is your pricing policy regualted by any authority?
19. Briefly identify some problems encountered in distribution of your petroleum products.
(a) Transportation problem
(b) Storage problems
(c) Labour disparities / strikes
(d) Refineries inability to meet demand
(e) Others ———————————————————-
20. Identify the measures taken to solve these problems.
Increasing financial base of the firms
Increasing the number of depots
Increasing the number of service station
Provision of infrastructural facilities
21. What promotional strategies do you adopt?
Advertising Personal selling
Sales promotion Publicity
All of the above
22. Does your firm provide additional services in its operation?
23. Give recommendations towards effective marketing of petroleum products in Nigeria. ———————————————————————————————————————————————————————————————————————–
Adelman, M.A. (1993): The World Petroleum Market.
Resources for Future Reading, IKP Inc.
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Hallowey, J.R. et al (1994): The Environment of Marketing Management. Dryden Press Illinois, New Jersey.
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Mitchell and Hwegy C. (1985): Elements of Marketing. Prentice Hall Inc. New Jersey.
Nwokoye N.G. (1981): Modern Marketing for Distribution Channels. Macmillian Press Ltd. London.
Powersox D.J. et al (1980): Management in Marketing Channel. McGraw Hill Book Co. New York.
Rosenberg L.J. (1974): Marketing for Business Growth. McGraw Hill Inc. New York.
Scout R. (1970): Petroleum and the Nigerian Economy. Standford University Press, California.
Stanton W.J. (1981): Fundamental of Marketing. McGraw Hill Book Co. Inc. Tokyo.
Wilson C. (1983, April): The Problems of Marketing and Petroleum Fuel Products. Business Times,
Kabir A. (2005, May): NNPC Sets-up Floating Mega Stations in Nigeria Delta. NNPC News Bulletin. Vol. 26, Pg. 24.
National Concord, Wednesday, October 22, 1986, pg. 24.
Marketing Petroleum Products In Nigeria – Associated Problems
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