Impact Of De-egulation Of The Down-Stream Oil Sector On Economy
(A Case Study Of Nigerian National Corporation) (Nnpc)
The de-regulation of the downstream oil sector has ushered in a profound transformation across various economic facets, catalyzing a shift towards market-driven dynamics. This paradigmatic shift has triggered increased competition, fostering efficiency gains and innovation within the sector. Moreover, it has led to enhanced investment prospects, bolstering infrastructural development and job creation. The restructuring has also streamlined supply chains, mitigating bottlenecks and reducing operational costs for both industry players and consumers. Additionally, by encouraging private sector participation and reducing government intervention, de-regulation has engendered a more agile and responsive market environment, capable of swiftly adapting to global market fluctuations and geopolitical dynamics. Consequently, the economy has witnessed improved resilience and dynamism, fostering sustainable growth trajectories while concurrently enhancing energy security and diversification agendas.
Deregulation or the removal of fuel subsidy has been boiling over Nigerians because of its attendant problems such as inflation, hardship, unemployment, the government’s insecurity and unreliability over promises. The privatization of the downstream oil sector will enhance investments and empowerments of Nigerians as well reduce the level of corruption in the sector. The population of study was 400 and a sample size of 200 which give 5% of the total population. Primary and secondary method of data collection was adopted. Also, three hypotheses were tested The objective of this study is to evaluate the patter of petroleum prices in Nigeria. The problem of this study is that market failure made government to venture into petroleum product marketing and distribution. The findings revealed that the removal of petroleum subsidy will bring attention on government to promote other relevant sector of economy like education, health and agriculture. And also Deregulation will break the monopoly of Nigeria National Petroleum Corporation (NNPC). The following recommendation were made, that the four refineries already established should be maintained and made to operate at full capacity. The government should show degree of honesty, sincerity, accountability, reliability transparency and integrity in its dealings with the people. This research work focus at social-economic implications of the deregulation by examining the merits and demerits involved. This work recommends that the nation will be better off with this privatization of downstream oil section provided that Nigerian are carried along and government provides the essentials of life as a panacea.
Title
Approval Page
Dedication
Acknowledgement
Abstract
Table of contents
CHAPTER ONE
1.0 Introduction •
.1 Background of the Study
1.2 statements of problem
1.3 objectives of the study
1.4 research question
1.5 statement of Hypothesis
1.6 Significance of the Study
1.7 Scope of the study
1.8 Limitations of the study
1.9 Definition of terms
CHAPTER TWO
LITERATURE REVIEW
2.1 Socio-economic implication of
De-regulation of the downstream oil
Sector in Nigeria
2.2 The essence of deregulation
2.3 The fear of Nigerians on subsidy removal
2.4 The economic of deregulation in the
Downstream petroleum sector
2.5 Oil sector Deregulation the revolution
Nigerian needs
2.6. The economic of privatizing and
Deregulation in the Nigerian
Downstream oil sector
2.7. Refineries in crisis
2.8. Deregulation and the Nigeria economy
2.9. Breaking the monopoly
2.10 Possible unintended outcomes
2.11 Impact of privatization and deregulation 18
2.12 Reductive effect of subsidy removal
Nigerians
2.13 Comparative costs of fuel among
OPEC, table I. comparative prices
Per liter of petrol in Nigeria currency
(naira)
2.14 Table 2: Comparative petrol prices
Among some African countries.
2.15 Table 3: Comparative petrol prices
Among some African countries 11.
2.16 Table 4: Comparative petrol prices
2.17 Table 5: Deregulation a true step of
Growth
2.18 Deregulation, pricing and subsidy
Analysis’s perspective
CHAPTER THREE
2.0 W&i iâ gy
3.1 Introduction
3.2 Research design
3.4 Sources/methods of data collection
3.5 Sampling techniques
3.6 Validity and reliability of measuring instruments
3.7 Method of data analysis
CHAPTER FOUR
4.0 Presentation and analysis of data
4.1 Introduction
4.3 Analysis of data
4.5 interpretation of result
CHAPTER FIVE
5.0 Summary, Conclusion and Recommendation
5.1 Introduction
5.2 Summary
5.3 Conclusion
5.4 Recommendation
Bibliography
Appendixes
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Petroleum products supplied have always been an acid test that is, a way of deciding whether something is successful to successive government in
Nigeria. With the new democratic dispensation, the supply and distribution of petroleum products improved but this was without a price- frequent increase in petroleum products prices. Few months to end the regime, the ugly incidence of petroleum scarcity surface again and one begin to wonder if there is any solution to this problem.
The combined impact of erratic and inadequate supply and unending price increases have brought untold hardship to the citizen 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 shortage of individual products. Indeed many industries have been compelled to close, due to non availability of some these product.
In a bid to solve the problem in many developing countries, structural reform of petroleum markets has become a critical component of macroeconomic liberalization policies. Unexpectedly, the outcome of the deregulation would give room for competition which would transform to price reduction and excellent supply and distribution of the deregulation exercise, critically appraising its impact on petroleum pricing, consumption and the general living standard of the people.
1.2 STATEMENT OF THE PROBLEM
Historically, the major petroleum marketing companies were the main sources of petroleum products supply. The companies transported and distributed the produced relying on their distribution and retail outlets.
This was an era of deregulation To which Nigeria paid market determined prices for products.
The Nigerian economic activities expanded the seventies such that private companies could not be able to cope with increase demand for products. The storage was endemic on regularly found among a particular group and create social and economic dislocation in the country. The market failure made government to venture into petroleum product marketing a-d distribution.
1.3 OBJECTIVE OF THE STUDY
The purpose of this study is to appraise, the deregulation exercise that was carried out in the Nigerian downstream oil sector. The specific objectives of this study are:
1. To evaluate the pattern of petroleum prices in Nigeria.
2. To examine the consumption pattern of petroleum products before and after the deregulation.
3. To examine the impact of the deregulation of downstream oil sector on petroleum products pricing in Nigeria.
4. To explore the reasons why deregulation has not yielded the desired result in terms of price and supply.
1.4 RESEARCH QUESTION
The following questions were designed for this study?
1. Is there any relationship between product prices and de-regulations?
2. To what extent has the de-regulation of the downstream oil sector impacted on petroleum products pricing in Nigeria?
3. How has the de-regulation exercise impacted on the consumption pattern of petroleum products in Nigeria?
4. What is the pattern of petroleum products pricing in Nigeria over the year?
5. How does the regulated downstream sector differ from the de-regulated era?
1.5 THE 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 de-regulation.
It shall also be found valuable by ideologists and government agencies as well as NGOS 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.
1.6 SCOPE OF THE STUDY
The study seeks to investigate the effect of the deregulation on the prices and consumption of petroleum products as well as its impact on the living standard of Nigerians. The empirical analysis restricted to the period between 1986 and 2010 because, it was during that period that policy was implemented.
1.7 LIMITATIONS OF THE STUDY
The limitations of this study lie in the under listed constraints:
a. There were insufficient journals and textbooks on this topic which led to scanty information that subsequently affected the literature review. However, the researcher made’ use of the available ones.
b. There was non-existence of already made research work on this topic hence the researcher encountered difficulties in the course of carrying out this research work.
C. Time and duration of this project work was too short and this adversely affected the research work.
d. Lack of finance was also one of the limitations faced by the researcher during the time of conducting this research work.
e. Lastly, another major constraint was inadequate co-operation by the respondents which reduced the amount of data collected.
1.8 DEFINITION OF THE TERM
DE-REGULATION: this is a process of freeing a trade, a business activity e.t.c from rules and controls.
OIL: A thick liquid that is found in rock under ground
SECTOR: A part of an area of activity, especially of a country economy.
ECONOMY: The relationship between production, trade and the supply of money in a particular country or region.
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.
1.8 OPERATIONAL DEFINITION OF TERMS
De-regulation is described as the process of government limiting its control in a sector or means of economical production.
De-regulation is refers to as system in which government lackens (not putting adequate attention laws of control in business or outright withdrawal from it.
Deregulation is characterized by privatization and government selling off her shares in major companies and government bodies are then set to regulate, supervise and control private participation.
2.9 HISTORY OF ORGANIZATION OF STUDY
Nigeria National petroleum corporation (NNPC) was established on April 1,1977 as a merger of the Nigerian National oil corporation and the Federal ministry of mines and steel. NNPC by law manager the joint venture between the Nigeria federal government and a number of foreign multinational corporations, which include Royal Dutch shell, Agip, Exxonmobil, chevron, and Texaco (now merged with chevron). Through collaboration with these companies, the Nigerian government conducts petroleum exploration and production.
In 2007, the need of the Nigerian wing of transparency, international said salaries for NNPC workers were too low to prevent graft.
The Nigerian national petroleum corporation (NNPC) lowers in Abuja is the headquarters of NNPC. Consisting for four identical towers, the complex is located on Herbert Macaulay way, central business district Abuja. NNPC also has zonal offices in Lagos, Kaduna, portharcourt and warri. It has an international office located in London, united kingdom.
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The deregulation of the downstream oil sector can have significant impacts on an economy. Downstream refers to the sector of the oil industry responsible for refining, distributing, and selling petroleum products to consumers. Deregulation in this context typically involves reducing or eliminating government control and intervention in pricing, distribution, and market entry. The impacts of such deregulation can vary depending on the specific policies and the economic context of the country. Here are some potential effects:
- Price Fluctuations:
- Immediate Price Increase: Deregulation often leads to an immediate increase in fuel prices. When government subsidies are removed, prices tend to reflect the true market value of oil, which can be volatile. This can result in higher transportation costs and increased inflationary pressures.
- Price Volatility: Deregulation may expose consumers to greater price volatility. Prices can fluctuate rapidly in response to changes in global oil markets, which can impact the budgets of households and businesses.
- Market Efficiency:
- Competition: Deregulation can stimulate competition in the downstream oil sector. With fewer barriers to entry, new players can enter the market, potentially leading to lower prices, improved services, and innovation.
- Efficiency: Deregulation can encourage companies to operate more efficiently. When profit margins are not guaranteed through subsidies, companies may invest in better infrastructure and technology to reduce costs and improve their competitiveness.
- Government Revenue and Fiscal Impact:
- Revenue Reduction: Governments often derive significant revenue from taxes and levies on petroleum products. Deregulation can reduce these revenues, affecting government budgets. To compensate, governments may need to implement alternative revenue-raising measures or reduce spending.
- Energy Security:
- Vulnerability to Global Markets: Deregulation can make a country more vulnerable to global oil price fluctuations. This can pose challenges for energy security, especially if a nation relies heavily on imported petroleum products.
- Environmental Considerations:
- Incentives for Efficiency: Deregulation can incentivize the adoption of cleaner and more efficient technologies as companies seek to reduce costs and remain competitive.
- Environmental Impact: On the other hand, if deregulation leads to lower fuel prices, it may also encourage higher fuel consumption, potentially increasing greenhouse gas emissions and air pollution.
- Consumer Impact:
- Impact on Households: Consumers may experience both benefits and drawbacks. Lower prices during periods of oversupply can reduce costs, but they may face higher prices during periods of scarcity or market volatility.
- Investment and Infrastructure:
- Investment Attraction: Deregulation can attract foreign and domestic investments in the downstream oil sector. However, the extent of investment often depends on the overall investment climate, stability, and market potential.
- Job Market:
- Employment: Deregulation can lead to shifts in employment within the industry. While it may result in job losses in less efficient or less competitive firms, it can also create new job opportunities as companies expand and invest.
In summary, the impact of deregulation of the downstream oil sector on an economy is multifaceted. It can lead to increased competition, market efficiency, and potentially lower prices for consumers. However, it can also introduce price volatility, reduce government revenue, and raise concerns about energy security and environmental consequences. The specific outcomes depend on various factors, including the degree of deregulation, market conditions, and government policies put in place to manage the transition.