Deregulation Of The Downstream Oil Sector In Nigeria As A Panacea To Economic Recovery Of The Country
Deregulation Of The Downstream Oil Sector In Nigeria As A Panacea To Economic Recovery Of The Country
Abstract
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. 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 decides 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 count.
Table of Contents
- Title page i
- Certification page ii
- Dedication iii
- Acknowledgement iv
- Abstract v
- Table of content
Chapter One
1.0 Introduction
- 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
- Reference
Chapter Two
2.0 Literature Review
- 2.1 General Overview of the Deregulation in Nigeria
- 2.2 Conceptual Clarification
- 2.3 Rationale Behind Government’s Plan to Deregulation
- 2.4 The Relevance of the Deregulation and Important
- 2.5 Challenges of Deregulation
- 2.6 Obstacles and Trend of Deregulation of the Downstream
- 2.7 The Effect of Deregulation of Downstream oil Sector
- 2.8 The Impact of Deregulation of Downstream oil Sector
- 2.9 The Role and Economic Implication of the Deregulation
- 2.10 Government Strategy for Deregulation the Downstream
- 2.11 Success Story of Deregulation in other sectors
- References
Chapter Three
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
- Reference
Chapter Four
4.0 Analysis of Data
- 4.1 Presentation Analysis of Data
- 4.2 Testing of Hypothesis
- 4.3 Discussion of Findings
- References
Chapter Five
5.0 Summary and Recommendations and Conclusion
- 5.1 Summary of Findings
- 5.2 Recommendation
- 5.3 Conclusions
- Bibliography
- Appendix
Chapter One
1.0 Introduction
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:
- To evaluate the pattern of petroleum products pricing in Nigeria;
- To examine the consumption pattern of petroleum products before and after the partial deregulation;
- To examine the impact of the deregulation of downstream oil sector on petroleum products pricing in Nigeria;
- To investigate the likely effect of the deregulation of the downstream oil sector on the living standard of the people.
1.4 Research Questions
The study would examine the following questions:
- What is the pattern of petroleum products pricing in Nigeria over the years?
- How has the deregulation exercise impacted on the consumption pattern of petroleum products in Nigeria?
- To what extent does the deregulation effort of the downstream oil sector impacted on petroleum products pricing in Nigeria?
- 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
Hypothesis One
- 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.
Hypothesis Two
- 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.
Hypothesis Three
- Hi: That the regulated downstream sector differs significantly from the deregulated era.
- Ho: That the regulated downstream sector does not differ significantly from the deregulated era.
Hypothesis Four
- 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.
Hypothesis Five
- 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.
1.7 Scope of the Study
This study shall analyze the Deregulation of the Downstream Oil Sector in Nigeria as a solution to Economic Recovery of the Country. The study will foster citizens consciously or unconsciously betray patriotism by beating undeserving drums of support for public office holders in a bid to defend their territory, whether the supported person/action is worth condemning or not.
1.9 Definition of Terms
Deregulation:
This is a process of freeing a trade, a business activity,etc from rules and controls.
Downstream:
This is a positive along a river which is nearer the sear.
Sector:
A part of an area of activity, especially of a country’s economy.
Oil Subsidy:
Money that is paid by a government to reduce the cost of services or of producing oil so that their prices can be kept low
Chapter Five
Summary, Conclusion and Recommendation
5.1 Summary
In this study, our focus was to examine the deregulation of downstream oil sector in Nigeria as a solution to economic recovery of the country using federal university of petroleum resources as a case study. The study specifically was aimed at highlighting the pattern of petroleum products pricing in Nigeria. The study also examine the consumption pattern of petroleum products before and after the partial deregulation. The study further examine the impact of the deregulation of downstream oil sector on petroleum products pricing in Nigeria. Lastly, investigate the likely effect of the deregulation of the downstream oil sector on the living standard of the people.A total of 80 responses were validated from the enrolled participants where all respondent are drawn from staff of staff of federal university of petroleum resources.
5.2 Conclusion
Based on the finding of this study, the following conclusions were made:
- The deregulation exercise has impacted on the consumption pattern of petroleum products in Nigeria.
- The deregulation of the downstream oil sector has largely impacted on petroleum products pricing in Nigeria.
- That the regulated downstream sector differs significantly from the deregulated era.
- Partial deregulation of the downstream oil sector in Nigeria will yieldmore deserve economic recovery.
5.3 Recommendation
- That first, the government should commercialize the existing four refineries to the likes of Dangote, Otedola, Ifeanyi Mba, Adenuga, who are successful businessmen and have them tender their terms, such that oil will be refined in Nigeria and importation of refined oil will become a thing of the past.
- That if the four existing refineries cannot provide enough fuel for domestic consumption, the federal government can license another serious bidder to build one or two to augment the four existing ones. The essence is to ensure that the refineries are operating from its generated revenue to serve Nigerians and also add to her income generation and relief the federal government of the expenses of subsidization.
- That as soon as these refineries are ready, Nigeria can deregulate, in the context of removing subsidy. Countries abound who are OPEC members whose pump price are far below Nigeria’s erstwhile N65 per litre. Therefore, I still believe that if Saudi Arabia is selling at $0.12 (N18), Kuwait sells at $0.21(N32), United Arab selling at $0.37 (N57), Venezuela selling at $0.05 (N7), Qatar sells $0.22 (34), Iran sells at $0.11 (N17), Algeria sells at $0.2 (N31)[30], there is no reason on earth for Nigeria to sell currently at (N97) from the erstwhile N65 following the pace of the United States of America who is not an OPEC member, instead of emulating their fellow OPEC members like Venezuela.
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