Evaluating the economic effects of oil and gas exploitation on the performance of retail business in bulisa district Uganda

Chapter one

Introduction

1.0 Introduction of the study

This chapter presents the background of the study, the problem statement, purpose, objectives of the study, research questions, study scope, justification of the study, significance, hypotheses, conceptual framework, as well as operational definition of key terms and concepts.

1.1 Background of the study

The discovery and exploitation of oil and gas resources have historically produced mixed economic outcomes for host communities worldwide. While oil and gas activities generate significant revenue, create employment, and stimulate infrastructure development, they often lead to economic distortions, inflation, and the displacement of local businesses (Ross, 2012; Van der Ploeg, 2011). In many resource-rich countries, the retail sector a key component of local economies experiences both positive spillover effects (increased consumer spending and population influx) and negative effects (rising operational costs, land speculation, and competition from large firms). Studies in countries such as Nigeria, Venezuela, and Indonesia show that local retail businesses frequently struggle to cope with the economic volatility and cost pressures associated with oil booms (Auty, 2001; Sachs & Warner, 2001).

In Africa, oil and gas exploitation has been a double-edged sword for local economies. In Nigeria’s Niger Delta, Ghana’s Western Region, and Angola’s Cabinda province, oil activities have triggered rapid urbanisation and increased demand for goods and services, benefiting some retail businesses. However, the same activities have also caused inflation, environmental degradation, and the marginalisation of indigenous small businesses (Watts, 2004; Obi & Rustad, 2011). Research across the continent consistently shows that retail enterprises in oil-producing regions often face challenges such as rising rental costs, fluctuating consumer demand tied to oil price cycles, and competition from foreign companies (Ovadia, 2016; World Bank, 2023). These dynamics highlight the need to critically evaluate how extractive industries affect the performance of local retail businesses.

Uganda discovered commercially viable oil and gas reserves in the Albertine Graben region in 2006. Since then, the country has been preparing for commercial production, expected to begin in 2026. The government anticipates that oil revenues will transform the economy, create jobs, and improve infrastructure (Ministry of Energy and Mineral Development, 2024). However, early studies indicate that oil and gas activities have already begun to affect local economies in host districts through land acquisition, population influx, and changes in market dynamics (Kashambuzi, 2022; Muhumuza, 2023). While some sectors have benefited, small and medium enterprises, particularly retail businesses, have reported mixed experiences ranging from increased sales due to the presence of oil workers to higher operational costs and displacement.

Buliisa District, located in western Uganda, is one of the primary host districts for Uganda’s oil and gas projects, including the Tilenga oil fields. The district has witnessed significant changes since the discovery of oil, including infrastructure development, land compensation, and an influx of oil company workers and contractors. Retail businesses in Buliisa ranging from small shops, restaurants, and trading outlets form a critical part of the local economy and provide essential goods and services to residents. However, the presence of oil and gas activities has created both opportunities and challenges for these businesses. Some retailers have benefited from increased demand, while others have struggled with rising rents, competition from larger suppliers, price fluctuations, and disruption of traditional trading patterns (Buliisa District Local Government, 2024; Atuhaire et al., 2023).

Despite the growing body of literature on the macroeconomic impacts of oil in Uganda, there is limited empirical research focusing on the micro-level economic effects of oil and gas exploitation on the performance of retail businesses in host districts such as Buliisa. This study therefore seeks to evaluate the economic effects of oil and gas exploitation on the performance of retail businesses in selected sub-counties of Buliisa District, Uganda.

1.2 Statement of the problem

The discovery and ongoing exploitation of oil and gas resources in the Albertine Graben region of Uganda have brought significant economic changes to host districts, including Buliisa. While these activities are expected to generate revenue, create employment, and stimulate infrastructure development, they have also triggered complex economic dynamics at the local level. In Buliisa District, retail businesses which form the backbone of the local economy and provide essential goods and services to residents are experiencing both opportunities and challenges arising from oil and gas operations.

Some retail enterprises have benefited from increased consumer demand due to the influx of oil workers and contractors, while many others are struggling with rising operational costs, increased rental prices, land speculation, fluctuating consumer demand tied to oil price cycles, and competition from larger suppliers. These effects have direct implications for the performance, sustainability, and survival of small retail businesses in the district. Despite the growing body of literature on the macroeconomic impacts of oil in Uganda, there is limited empirical research examining the specific economic effects of oil and gas exploitation on the performance of retail businesses at the micro level in host communities such as Buliisa District. Without a clear understanding of these effects, policymakers, local governments, and development partners lack evidence-based insights needed to design targeted interventions that can protect and support local retail enterprises amid oil and gas development. This study therefore seeks to evaluate the economic effects of oil and gas exploitation on the performance of retail businesses in selected sub-counties of Buliisa District, Uganda.

Objectives of the study

1. To assess the effects of oil and gas related government policies on retail business performance
2. To examine the influence of infrastructural development on retail business

• To identify the challenges faced by retail business due to oil and gas exploration

Research questions

1. What are the effects of oil and gas policies on retail business?
2. How does infrastructure development influence retail business?

• What challenges do retail business face?

Scope of the study

This section includes content scope, geographical scope and time scope.

Content scope

This section will include; the effects of oil and gas related government policies on retail business performance, the influence of infrastructural development on retail business and the challenges faced by retail business due to oil and gas exploration.

Geographical scope

The study will be carried out in Bullisa district.

Time scope

The study will be carried out for a period of 3 months

Significance of the study

This study is important because it provides a comprehensive understanding of how oil and gas activities influence the performance of retail businesses in Buliisa District, Uganda. By focusing on government policies, infrastructural development, and the challenges associated with oil and gas exploration, the study generates insights that are valuable to multiple stakeholders.

First, the findings on the effects of oil and gas–related government policies will be useful to policymakers and regulatory authorities. The study will highlight whether existing policies support or hinder the growth of retail businesses, thereby guiding the formulation of more inclusive and business-friendly policies. This can help ensure that the benefits of the oil and gas sector are equitably distributed to local enterprises.

Second, by examining the influence of infrastructural development, the study will benefit planners, investors, and local government authorities. Improved infrastructure such as roads, electricity, and communication networks is often associated with oil and gas projects. The study will show how these developments affect retail business performance, helping stakeholders make informed decisions on infrastructure investments that promote local economic growth.

Third, the identification of challenges faced by retail businesses due to oil and gas exploration will be valuable to business owners and entrepreneurs. Understanding issues such as increased competition, rising costs of living, supply disruptions, or displacement effects will enable retailers to develop adaptive strategies and improve their resilience in a rapidly changing economic environment.

Additionally, the study will contribute to academic knowledge by filling gaps in literature regarding the local economic impacts of oil and gas exploitation, particularly in emerging oil regions like Buliisa District. Future researchers will benefit from the findings as a reference point for further studies.

CHAPTER TWO

LITERATURE REVIEW

Introduction

The actual literature was reviewed objective by objective, and the sources of literature reviewed include; secondary sources especially text books, journals, newspapers, research dissertations, government reports and publications, and primary source, especially pilot study that was carried out.

2.2 Oil and gas related government policies

Government policies play a central role in shaping the development of the oil and gas sector and its broader economic impacts, including effects on local businesses such as retail enterprises. In Uganda, the policy framework governing oil and gas activities has evolved to ensure sustainable resource management, national participation, and economic transformation.

The foundation of Uganda’s oil and gas policy framework is the National Oil and Gas Policy (NOGP) of 2008, which was developed following the discovery of commercially viable oil reserves in 2006. The policy aims to create a conducive environment for exploration, development, and production while ensuring efficient management of petroleum resources and revenues for national development (Government of Uganda, 2008) . The policy emphasizes value addition, poverty reduction, and long-term economic benefits, reflecting the government’s intention to use oil resources as a catalyst for socio-economic transformation .

A key aspect of Uganda’s oil and gas policy is the establishment of a comprehensive legal and institutional framework. The Petroleum (Exploration, Development and Production) Act, 2013 operationalizes the NOGP by regulating upstream activities such as licensing, exploration, and production. It also establishes institutions responsible for overseeing the sector and ensures transparency, environmental protection, and public safety (Government of Uganda, 2013) . Complementary legislation, such as the Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act, 2013, governs midstream operations including transportation and refining, thereby covering the entire oil and gas value chain .

Another critical policy component is the promotion of local content. Uganda’s policy framework seeks to ensure “optimum national participation” in oil and gas activities through employment of local labor, use of local suppliers, and technology transfer (OAG, 2015; Government of Uganda, 2008) . Local content policies are intended to integrate domestic businesses into the oil and gas value chain, thereby stimulating growth in sectors such as retail, logistics, and services. However, studies indicate that implementation challenges, including capacity constraints and varying interpretations among stakeholders, limit the full realization of these objectives (Ablo, 2017; Ovadia, 2014) .

In addition, fiscal and revenue management policies are central to Uganda’s oil and gas governance. The government employs production sharing agreements (PSAs) and taxation mechanisms to ensure that a significant portion of oil revenues accrues to the state. These fiscal regimes are designed to maximize national benefits while attracting foreign investment (Wood Mackenzie, 2023) . Revenue generated from the sector is expected to contribute significantly to national development, including infrastructure and public services, which indirectly affect business performance .

Institutionally, bodies such as the Petroleum Authority of Uganda (PAU) and the Uganda National Oil Company (UNOC) have been established to regulate, monitor, and participate in oil and gas activities. These institutions ensure compliance with policies, promote transparency, and safeguard national interests in the sector (PAU, 2022) . Their role is crucial in balancing economic benefits with environmental and social considerations, particularly in oil-producing regions such as Buliisa District.

Despite the existence of a robust policy framework, several scholars highlight gaps in implementation and coordination. Weak alignment between policies and laws, limited institutional capacity, and governance challenges have been identified as constraints affecting the effectiveness of oil and gas policies in Uganda (Parliament of Uganda, 2023) . These challenges may influence how the benefits of the oil sector are distributed across local economies, including retail businesses, oil and gas–related government policies are designed to promote sustainable development, local participation, and economic growth. However, the extent to which these policies positively influence sectors such as retail business depends largely on their effective implementation, institutional capacity, and the inclusiveness of local economic linkages.

Objective two

Government policies play a central role in shaping the development of the oil and gas sector and its broader economic impacts, including effects on local businesses such as retail enterprises. In Uganda, the policy framework governing oil and gas activities has evolved to ensure sustainable resource management, national participation, and economic transformation.

The foundation of Uganda’s oil and gas policy framework is the National Oil and Gas Policy (NOGP) of 2008, which was developed following the discovery of commercially viable oil reserves in 2006. The policy aims to create a conducive environment for exploration, development, and production while ensuring efficient management of petroleum resources and revenues for national development (Government of Uganda, 2008) . The policy emphasizes value addition, poverty reduction, and long-term economic benefits, reflecting the government’s intention to use oil resources as a catalyst for socio-economic transformation .

A key aspect of Uganda’s oil and gas policy is the establishment of a comprehensive legal and institutional framework. The Petroleum (Exploration, Development and Production) Act, 2013 operationalizes the NOGP by regulating upstream activities such as licensing, exploration, and production. It also establishes institutions responsible for overseeing the sector and ensures transparency, environmental protection, and public safety (Government of Uganda, 2013) . Complementary legislation, such as the Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act, 2013, governs midstream operations including transportation and refining, thereby covering the entire oil and gas value chain .

Another critical policy component is the promotion of local content. Uganda’s policy framework seeks to ensure “optimum national participation” in oil and gas activities through employment of local labor, use of local suppliers, and technology transfer (OAG, 2015; Government of Uganda, 2008) . Local content policies are intended to integrate domestic businesses into the oil and gas value chain, thereby stimulating growth in sectors such as retail, logistics, and services. However, studies indicate that implementation challenges, including capacity constraints and varying interpretations among stakeholders, limit the full realization of these objectives (Ablo, 2017; Ovadia, 2014) .

In addition, fiscal and revenue management policies are central to Uganda’s oil and gas governance. The government employs production sharing agreements (PSAs) and taxation mechanisms to ensure that a significant portion of oil revenues accrues to the state. These fiscal regimes are designed to maximize national benefits while attracting foreign investment (Wood Mackenzie, 2023) . Revenue generated from the sector is expected to contribute significantly to national development, including infrastructure and public services, which indirectly affect business performance .

Institutionally, bodies such as the Petroleum Authority of Uganda (PAU) and the Uganda National Oil Company (UNOC) have been established to regulate, monitor, and participate in oil and gas activities. These institutions ensure compliance with policies, promote transparency, and safeguard national interests in the sector (PAU, 2022) . Their role is crucial in balancing economic benefits with environmental and social considerations, particularly in oil-producing regions such as Buliisa District.

Despite the existence of a robust policy framework, several scholars highlight gaps in implementation and coordination. Weak alignment between policies and laws, limited institutional capacity, and governance challenges have been identified as constraints affecting the effectiveness of oil and gas policies in Uganda (Parliament of Uganda, 2023) . These challenges may influence how the benefits of the oil sector are distributed across local economies, including retail businesses.

Overall, the literature indicates that Uganda’s oil and gas–related government policies are designed to promote sustainable development, local participation, and economic growth. However, the extent to which these policies positively influence sectors such as retail business depends largely on their effective implementation, institutional capacity, and the inclusiveness of local economic linkages.

Objective three

Oil and gas exploration has been widely associated with both economic opportunities and socio-economic disruptions in host communities. In developing countries such as Uganda, particularly in Buliisa District within the Albertine Graben, retail businesses often experience a range of challenges resulting from exploration and early development activities. These challenges arise from environmental disruption, socio-economic changes, infrastructure pressure, and policy-related constraints.

One major challenge faced by retail businesses is inflation and rising cost of goods and services. Oil and gas exploration activities attract an influx of workers, companies, and service providers, which increases demand for basic goods such as food, housing, and transport. This demand-pull inflation reduces the purchasing power of local residents and increases operating costs for retailers. Studies in Buliisa indicate that communities around oil projects often experience increased cost of living due to heightened economic activity linked to exploration (Atugonza, 2024) . As a result, retail businesses struggle to maintain stable pricing and profit margins.

Another significant challenge is displacement and land access restrictions. Oil exploration often involves land acquisition for drilling sites, pipelines, and infrastructure development. This can lead to relocation of communities and businesses, disrupting established retail networks and customer bases. In Buliisa, residents have reported restricted access to traditional farming and trading areas due to oil infrastructure development, which indirectly affects retail business operations that depend on local supply chains and rural consumers (Nyakairu, 2024) .

Retail businesses also face market disruption and changes in consumer behavior. The influx of workers from outside regions temporarily increases demand for goods and services, but this demand is often unstable and concentrated in specific locations. Once exploration phases slow or shift, demand declines, leaving retailers with unsustainable business patterns. Additionally, local consumers may shift spending toward higher-priced goods introduced by external companies, affecting small local retailers’ competitiveness.

Competition from external businesses and investors is another key challenge. Oil and gas exploration attracts national and international companies that often have more capital and better logistics networks than local retailers. These firms can dominate supply chains, reducing market share for small local retail businesses. This “enclave economy” effect can marginalize local enterprises, limiting their participation in the oil-driven economy (Ovadia, 2014).

Environmental degradation also affects retail businesses indirectly. Oil exploration activities may lead to dust pollution, noise, and environmental disruption, which can reduce foot traffic in affected trading centers. In some cases, agricultural productivity declines due to land disturbance, reducing rural household incomes and therefore lowering demand for retail goods. Research in the Albertine Graben shows concerns about environmental impacts such as soil and water contamination linked to oil exploration activities (Mwesigye et al., 2025) . This ultimately weakens the economic base of retail markets that depend heavily on agriculture-driven incomes.

Furthermore, infrastructure strain and unequal development present additional challenges. While oil exploration may lead to improved roads and facilities, these developments are often designed to support oil operations rather than local retail ecosystems. This can create uneven access to infrastructure benefits, where major corridors improve while smaller trading centers remain underdeveloped, limiting retail expansion opportunities.

Lastly, policy and regulatory uncertainties can affect retail businesses. Government policies related to land use, compensation, taxation, and local content may change frequently during oil exploration phases. Such uncertainty makes it difficult for retailers to plan long-term investments or business expansion strategies, thereby increasing vulnerability.

Conclusion

CHAPTER THREE

METHODOLOGY

3.1 Introduction

This chapter presents the methodology that will be adopted during the study. It describes and discusses the research design, sample size and selection, the data collection methods will use and their corresponding data collection instruments, data management and analysis procedure as well as steps that will be taken to ensure validity and reliability during the study and measurement of variables.

3.2 Research Design

The study will adopt a cross-sectional design. The cross-sectional design will be adopted because data will be collected from a cross section of respondents by Amin (2005).  Since the study seeks to examine the relationship between variables, a simple bivariate correlation design will be adopted to determine the relationship between in study variables of Evaluating the economic effects of oil and gas exploitation on the performance of retail business in Bulisa district Uganda. The study will use both qualitative and quantitative approaches. The quantitative approach will be

adopted because the study intends to Evaluate the economic effects of oil and gas exploitation on the performance of retail business in Bulisa district Uganda. Such an endeavor can best be achieved when a quantitative approach is used because it allows for collecting numeric data on observable individual behavior of samples, then subjecting these data to statistical analysis (Amin, 2005:5).  A qualitative approach will also be adopted to enable the researcher capture data that will be left out by the quantitative approach. This will be aimed at capturing more in-depth information on the topic under investigation.

3.3 Study Population

According to UBO, (2019) there is a total of 400 SMEs in Bullisa. This is the total population that will be used in the study. This specific population has been arrived at due to their anticipated experience and knowledge on Oil and gas exploitation on the performance of retail Business in Bulisa district Uganda.

3.4 Study Sample

The study sample will be comprised of small and medium enterprises in Bullisa

3.5 Sampling Techniques and Procedure

The research will use sampling techniques to select respondents to the study, namely, simple random and purposive sampling techniques. Simple random sampling will be used because it ensures generalizability of findings and minimizes bias (Sekaran, 2003).  Purposive sampling technique will be used to select the senior management; these key informants will be purposively sampled because they are believed to have technical and specialized knowledge about the topic under investigation by virtue of the offices that they hold.

3.6 Data collection Methods

The section presents data collection methods which include survey method, interview and documentary review.

3.6.1 Survey Method

The study will use the questionnaire method to collect data. The questionnaire will be used because it allows for the collection of data from a big group of respondents in a short period as suggested by Mugenda and Mugenda (1999: 107). The questionnaire will also be used because it allows busy respondents to fill it in at their convenient time. It also allows respondents to express their views and opinions without fear of being victimized (Oso & Onen, 2008).

3.6.2 Interview Method

The study will employ interview method. Interviews in this study will help the researcher obtain more information on the topic under investigation. Interviews will be used because they fetch a variety of ideas needed for the study and give a deeper understanding of the topic. This method will also be used because it will offer the researcher an opportunity to adapt questions, clarify the questions by using the appropriate language, clear doubts and establish rapport and probe for more information (Sekaran, 2003).

3.6.3 Document Review Method

The researcher will review documents to obtain recorded information that is related to the issue under investigation. This method will be used because it enables the researcher access data at his convenient time, obtain data that are thoughtful in that the informants have given attention in obtaining them and enables the researcher obtain data in the language of the respondent (Oso & Onen, 2008: 45).

3.7 Data Collection Instruments

The instruments used in this study will be questionnaire, interview guide and document review checklist.

3.7.1 Self-Administered Questionnaire

The study will employ a questionnaire as a tool of data collection. The questionnaire for staff will have 5 sections. The questionnaires will be close ended. Close ended questions will be developed to help respondents make quick decisions; in addition, closed ended questions will help the researcher to code the information easily for subsequent analysis and narrow down the error gap while analyzing data as observed by Sekaran (2003:231).

3.7.2 Interview Guide

An unstructured interview will be used as a tool for collecting in depth information from the key informants. The guide will have list of topical issues and questions which will be explored while conducting the interviews. The guide will be drawn with the questions soliciting for the perception of the key informants regarding the Evaluating the economic effects of oil and gas exploitation on the performance of retail business in Bulisa district Uganda. The interview guide will be used because it obtains in-depth data which may not be possible to obtain when using self-administered questionnaires (Mugenda & Mugenda, 1999:17; Kakoza, 1999:27).

3.7.3 Documentary Review Checklist

A document review checklist will be used to collect more in-depth data on the topic under investigation. This will also enable the researcher to supplement the data that is acquired from the interviews and questionnaires. The researcher will analyze the documents and publications related to the study topic. Documents that are expected to be reviewed include Ministry of Health reports, Journals, and Newspapers.

3.8 Validity and Reliability of the Research Instruments

3.8.1 Validity

Validity is defined as the extent to which results can be accurately interpreted and generalized to other populations (Oso & Onen, 2008). While Borg & Gall, 1989 as cited in Onyinkwa, (2013) validity is defined as the degree to which results obtained by the research instrument correctly represented to the phenomenon understudy and Mugenda & Mugenda, (1999) as the accuracy and meaningfulness of inferences which are based on the research results.

Amin, (2005) recommended minimum CVI of 0.7 to be used. Validity will be tested using content validity index which involves judges scoring the relevancy of the questions in the instruments in relation to the study variables.

The formula for Content Validity Index is:

CVI =

Where CVI = content validity

n= number of items indicated relevant.

N = total no. of items in the instrument

3.8.2 Reliability

According to Mugenda and Mugenda, (2003) reliability is the measure of the extent to which research instruments can provide the same results upon being tested repeatedly.

Crobach’s coefficient alpha (a) as recommended by Amin, (2005, P.302) will be used to test the reliability of the research instrument. The instrument is deemed reliable if reliable of 0.7 and above is obtained and therefore, it will be adopted for use in the data collection.

Formula for reliability is

=      ()

Where  = alpha reliability co efficiency.

K=Number of items included4 in the questionnaire

= sum of variance of individual items

= variance of all items in the instrument.

The coefficient ranges between a=0.00 for no reliability, a =1.00 for perfect reliability. The closer alpha gets to 1.0 the better. If the study findings result to Cronbanch’s Alpha of 0.7 and above, this will signify that research instrument is good enough for the study. According to Amin (2005), all the measurements in the instrument that show adequate levels of internal consistency of cronbach’s alpha of 0.77 and above are accepted as reliable.

3.9 Data Collection Procedure

The researcher will obtain a letter of introduction from the Victoria university which will be presented to the authorities in the organization and after that she will obtain a list of all the staff in the organization.

The researcher will randomly select respondents to participate in the study; a self-administered questionnaire will be used to collect information from the above-mentioned respondents.

The researcher will also purposively select senior and middle level managers who will be interviewed.

3.10 Data Analysis

3.10.1 Analysis of quantitative Data

The statistical package which will be used for analysis of data in this study is the SPSS version 16.0. Different statistical techniques will be used namely: correlation and regression analysis. The upper level of statistical significance for hypothesis testing will be at 5%. All statistical test results will be computed at 2-tailed level of significance.

Descriptive statistics, namely frequency counts, percentages will be used to analyze the respondents’ demographic characteristics, and the mean and standard deviation will be used to analyze the respondents’ opinions on Evaluating the economic effects of oil and gas exploitation on the performance of retail business in Bulisa district Uganda.

Data will be analyzed and correlated using Pearson Product-Moment correlation coefficient to establish the relationship between the study variables as suggested by Sekaran (2003), Amin (2005) and Oso and Onen (2008).

3.10.2 Analysis of qualitative data

Qualitative data will be analyzed using content analysis. Responses from key informants will be grouped into recurrent issues. The recurrent issues which will emerge in relation to each guiding question will be presented in the results, with selected direct quotations from participants offered as illustrations.

3.11 Measurement of variables

Data on the respondent’s views and opinions on Evaluating the economic effects of oil and gas exploitation on the performance of retail business in Bulisa district Uganda of findings data will be obtained using scaled variables from a self-developed questionnaire.  A five-point Likert ordinal scales ranging from; strongly agree which shall be assigned 5, strongly Agree, 4 agree, Not Sure assigned 3, Disagree allocated 2 and strongly disagree allotted 1 to obtain responses on the variables. The Likert ordinal scale has been used by numerous scholars who have conducted similar studies such as Bowling, (1997).