CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
It is a clear fact that the economic problems facing the Nigerian oil sector are a legion. Worldwide, the petroleum product today are indispensable to human existence and industrial production. Specifically, industries in Nigeria assumed a special importance, such that ninety percent (90%) of her foreign earnings come from the oil sector. About 65% of government total income is equally expected from the sector. The down-stream operations currently contributes as much as 20% of GDP. Hence, the importance crucially of oil sector to productive capacity cannot be over emphasize.
The Nigerian oil sector has been experiencing a downward trend since eighties (80s). though the reason is attributed to the collapse of world market.
Nonetheless, poor management has often adduced for these economics doldrums (a state of stagnation)
Since independence, however, efforts have been made to keep the economy’s growth at a targeted pace. A lot of social-economic policy options have been made. The change is ranging from regulation, deregulation, disregulation, regulation, partial and full privatization scheme, to government actual participation in provision of goods and services. Thus, the establishment of public enterprises in sectors like mining, commerce, agriculture etc.
Engendered by its importance a major that for foreign exchange earnings and determinant of domestic productivity, government investment in oil sector become too large. It hence becomes antithetical to development it’s meant for. The sector is played with uncertainties, inefficiencies and ineffective institution. Thereby, the question of economic activities is reduced. The prime position of oil as a critical factor to economic growth makes it revival efforts inevitable.
To this effect, several options were offered by expert. These include borrowing from the world bank via IMF (International Monetary Fund) facilities. Structural Adjustment Programme (SAP), importation of fuel and deregulation of oil sector. The subject matter privatization and commercialization of public enterprises in oil sector is another option.
The concept of privatization and commercialization is not a new phenomenon in Nigeria economics literatures following the lead of Britain and United states of America, the then president Shehu Shagari administration concerned this concept in 1983, but the idea was aborted by military coup that usurped Shagari in 1984. The then succeeding military government headed by general Muhammed Buhari could not be able to do anything than approaching the concept before another coup in August 1985.
And when president Ibrahim Babangida assumed office he organized a fresh institute to review the earlier policy, a degree called ‘’privatization and commercialization decree 25, 1988’’ was promulgated which facilities legal backing for the exercise. Subsequently, technical committee on privatization and commercialization was inaugurated on the 27th of July 1988. The committee later christened Bureau of public enterprises (BPE) in 1966. It submitted its reports to transitional government of general Abubarkar who privatization proper at earnest before tended over the power to the democracy president Olusegun Obasanjo in May 29th, 1999. Today, much celebrated liberation of Nigeria oil sector is another coinage economic reform which incidentally on area of subject under the discussion in this thesis.
1.2 STATEMENT OF PROBLEM
It is obvious that the essence of public enterprise is to articulate and manage economic development process. A systematic effort in understanding the crisis that is confronting the petroleum product supply and distribution the country begins from the sources of product and the proceeds through a value claims to the final consumer.
Nigeria has been without problems since 1976. It became a special notorious in the late 80s running through 90s, the resultant instalment deteriorations of o r oil refineries has led to the outright breakdown. The attendant consequences of this is oil scarcity extracted by heading, diversion and smuggling. Vandalization of oil pipelines couples with activities of oil ‘’scarenger’’ this causing inferior makes this position but management in Nigeria hydrahuaded and Herculean task.
1.3 OBJECTIVE OF THE STUDY
The objectives of this project is to estimate the efficiency of privatization policy in oil sector. Basically, the concept is review via-a-vis.
a) Low capacity utilization in oil sector and the economy at large
b) Inefficiency in oil sector institutions culminating in scarcity of petroleum products
c) Vandals
d) Subsidy traps
Following closely the study will
a) Appraise commercialization in oil sector using Nigerian National Petroleum Corporation (NNPC)
b) Examine NNPC subsidiaries and modes operandi
c) Delinate between regulation and privatization
d) Make recommendations.
