DEREGULATION OF THE DOWNSTREAM OIL
SECTOR IN NIGERIA AS A PANACEA TO ECONOMIC RECOVERY OF THE COUNTRY:
(AN ANALYSIS OF 2010-2015 ECONOMIC
PROGRAMME OF NIGERIA)’
This study examined the deregulation of the downstream oil sector in Nigeria as a panacea to economic recovery of the country (An Analysis of 2010-2015 Economic Programme of Nigeria). In this study the researcher has find out some of the problems that are facing the deregulation of the downstream oil sector in Nigeria, these problems are continuous increase in petroleum price, scarcity of petroleum product . all these are the major problems that are facing the deregulation of the downstream oil sector which government have to help solving this problems by making fuel available and controlling the price. Also the researcher has find out some of the objective which will also help in the deregulation of the downstream oil sector which includes , investigating the effect or the deregulation of the downstream oil sector on the living standards of the people, also to examine the pre and unrealistic deregulation era and make critical comprise. And to explore the reason why partial deregulation has not yielded the desired result in terms of prices and supply. Data collection was also used in the research work, data collection is an important aspect of any type of research study. The method of data used for this study was primary and secondary sources. The researcher administered a total of 80 copies questionnaires to both in rural areas, from the data the following finding were apparent that a tremendous impact was made by downstream oil sector in Nigeria oil industries. Finally the findings and conclusion in the research work were also discussed, showing that without proper management, control and investment the revenue generated from deregulation of the downstream oil sector will be embossed by corrupt government officials. If government decide to force down the deregulation policy as currently conceived, it will greatly erode the ability of the people to cope with further price increases on petroleum products. Businesses would be further impaired to operate under a regime of higher energy cost, while ease of doing business indicators remains generally negative in the countr
TABLE OF CONTENTS
1.1 Background of the study
1.2 Statement of the problem
1.3 Objectives of the study
1.4 Research Questions
1.5 Research Hypothesis
1.6 Significance of the Study
1.7 Scope and Limitations of the study
1.8 Organization of the Study
2.0 Literature Review
2.1 Conceptual Clarification
2.2 Rational Behind Govt. Plant of Deregulation
2.3 The Relevance of the Deregulation
2.4 Obstacles and Trend of Deregulation of the Downstream
2.5 Potential Benefits of Deregulation of the Downstream
2.6 Effect of Deregulation of the Downstream oil Sector
2.7 The Impact of Deregulation of the Downstream
2.8 The Roleand Economic Implication of the Deregulation
2.9 Government Strategy for Deregulating the Downstream
2.10 Success Story of Deregulation in Other Sectors
3.0 Research Design and Methodology
3.1 Research Design
3.2 Area of Study
3.3 Population of the Study
3.4 Sample and Sampling Techniques
3.5 Instrument for Data Collection
3.6 Validity of Instrument
3.7 Method of Data Collection
3.8 Data Analysis
3.9 Expected Result
4.1 Presentation Analysis of Data
4.2 Testing of Hypothesis
4.3 Discussion of Findings
5.0 Summary and Recommendations and Conclusion
5.1 Summary of Findings
Appendix CHAPTER ONE
1.1 Background of the Study
Historically, major petroleum marketing companies were the main sources of petroleum product’s supply. The companies transported and distributed the products relying on their distribution and retail outlets. This was an era of Pre- regulation in which Nigerian paid market-determined prices for products. However, this arrangement was not sustainable given that it was dependent on the profit and market imperatives of the oil marketers. The country’s economic activities expanded in the seventies such that private companies could no longer cope with increase demand for products. This resulted in erratic supply of petrol and kerosene and ultimately acute scarcity of the product. The shortage was endemic and created social and economic dislocation in the country. This market failure made government to venture into petroleum products marketing and distribution.
The concern by government to overcome this lack of product and total dependency on oil companies led to policy shift towards regulations. Government therefore introduced uniform pricing to satisfy domestic demand, strengthen self-reliance and avoid a situation in which the oil companies could hold the country to ransom. The nation witnessed adequate supply of petroleum products up till 2000. Thereafter, due to the sustained devaluation of the Naira on account of the implementation of the Structural Adjustment Programme (SAP) coupled with the non-maintenance of the refineries, domestic production was soon undermined making it imperative for demand to be met through imports.
The shortages of petroleum products escalated in spite of increases in prices of products since 1999. The Olusegun Obasanjo administration on coming on board decided to gradually withdraw the subsidy on petroleum products to allow the mechanics of market forces to take its full course. This again, resulted to frequency increase in petroleum products prices.
1.2 Statement of the Problem
Petroleum products supplies have always been problematic for successive Governments in Nigeria. With the new democratic dispensation, the supply and distribution of petroleum products improved but this was without a frequent price increase in petroleum products. With few months to the end of the Obasanjo’s regime, the ugly incidence of petroleum scarcity surfaced again and one begins to wonder if there is any solution to this problem.
The contemporary passion and tension that usually characterize petroleum discourse is due to unquantifiable deprivations and sufferings it causes in Nigerians. As the 6th largest producer of petroleum, it is a contradiction that in the past decade, supply of all products has been changeable and on sharp decline. Ironically, as supply declined, products prices have been on the increase as successive governments searched for “appropriate pricing”. The combined impact of unreliable and inadequate supply and unending price increases have brought untold hardship to the citizenry and worse too, prevented economic recovery as promised by the present democratically elected government given that capacity utilization in the manufacturing sector nose-dives due to shortages of industrial products. Indeed many industries have been compelled to close due to non-availability of some of these products.
In the bid to solve the problem in many developing countries, structural reform of petroleum markets has become a critical component of macroeconomic liberalization policies. The role of the government in the petroleum sector is being redefined, and markets are being deregulated (i.e state interventions such as special treatments of state-owned oil companies, price controls and monopolies are being broken up). Increasingly, the private sector is participating in more competitive environment. But unexpectedly, the outcome of the deregulation has not been encouraging. There has been continuous increase in petroleum prices with persistent scarcity of petroleum products. It was expected that deregulation would give room for competition which would transform to price reduction and excellent supply and distribution network. This study is devoted on the evaluation of the deregulation exercise; critically appraising its impact on petroleum pricing, consumption and the general living standard of the people.
1.3 Objectives of the Study
The aim of this study is to appraise partial deregulation exercise that was carried out in the Nigerian downstream oil sector.
The specific objectives of this study are as follows:
i. To evaluate the pattern of petroleum products pricing in Nigeria;
ii. To examine the consumption pattern of petroleum products before and after the partial deregulation;
iii. To examine the impact of the deregulation of downstream oil sector on petroleum products pricing in Nigeria;
iv. To investigate the likely effect of the deregulation of the downstream oil sector on the living standard of the people; To examine the pre- and unrealistic deregulation era and make critical comparism; To explore the reasons why partial deregulation has not yielded the desired result in terms of prices and supply.
1.4 Research Questions
The study would examine the following questions:
i. What is the pattern of petroleum products pricing in Nigeria over the years?
ii. How has the deregulation exercise impacted on the consumption pattern of petroleum products in Nigeria?
iii. To what extent has the deregulation efforts of the downstream oil sector impacted on petroleum products pricing in Nigeria?
iv. How does the regulated downstream sector differ from the deregulated era?
v. Do you think that partial deregulation of the downstream oil sector in Nigeria will yield deserve economic recovery?
1.5 Formulation of Hypotheses
The following hypotheses were formulated based on the objective of the study:
Hi= alternative hypothesis
Ho= null hypothesis
Hi: The deregulation exercise has impacted on the consumption pattern of petroleum products in Nigeria.
Ho: The deregulation exercise has not impacted on the consumption pattern of petroleum products in Nigeria.
Hi: The deregulation of the downstream oil sector has largely impacted on petroleum products pricing in Nigeria.
Ho: The deregulation of the downstream oil sector has not impacted on
petroleum products pricing in Nigeria.
Hi: That the regulated downstream sector differs significantly from the
Ho: That the regulated downstream sector does not differ significantly
from the deregulated era.
Hi: That the partial deregulation of the downstream oil sector in Nigeria has yield deserve economic recovery of the country.
Ho: That the partial deregulation of the downstream oil sector in Nigeria has not yield deserve economic recovery of the country.
Hi: Partial deregulation of the downstream oil sector in Nigeria will
yield more deserve economic recovery.
HO: partial deregulation of the downstream oil sector in Nigeria will
yield less deserve economic recovery.
1.6 Significance of the Study
This study shall be found useful by all citizens of the country as well as policy makers and individuals affected by the scourge of deregulation. It shall also be found valuable by ideologists and Governmental agencies as well as NGO’s saddled with the responsibility of national citizens’ orientations, ethnic nationalities, and scholars with interest in similar areas of study will equally find this report very useful. The study will also serve as a point of reference to students in higher institutions and as a point of reference for further studies.
1.8 Organization of the Study
This study shall contain five chapters. The first chapter shall contain the background of the study, the statement of the research problem, the objectives of the study, the research questions etc that would guide the study. Chapter two would present the literature review on the subject matter. The methodology to be adopted in the study would be stated in chapter three. Chapter four shall focus on the presentation and analysis of collected data. The last chapter – chapter five, would present the summary of the findings, conclusion and appropriate recommendations.