INTRODUCTION:
Deregulation
policy has been globally embraced by many countries of the world, in order for
these countries to reduce public sector dominance and developing of liberalized
market while ensuring adequate supply of product. For the policy to be
successful in these other countries they had planed and mapped out an effective
policy response, which transcend into full deregulation. This achievement has
been benefited by other countries of the world like Peru, Chlean Argentina,
Mexico, Japan, USA of that of Nigeria all be different story. Because there has
brought a systematically this states and countries into state-owned oil
companies which has make a
significant turning point in the success story of
these countries
Against this backdrop of the recent debate on subsidies on
the down stream sector of the
petroleum, it is pertinent to highlight, in defails some of the pertinent question that have
arisen about what deregulation in
this sector means
DEREGULATION OF THE DOWN STREAM SECTOR
Deregulation of the downstream petroleum
sector refers to the reduction, or removal of government control, rules and
regulations that restrain free operational activities in the sector. This does not mean a complete elimination of the
laws that govern smooth operation of activities in the downstream oil or
petroleum sector. But in a non- shell, this means the role of government in
this sector will be limited mainly to providing regulatory oversight.
Deregulation of the downstream petroleum sector will
improve the efficient use of scare economic resources by subjecting decision in
the sector to the operation of the forces of demand and supply. This will
attract new seller, buyers and investors into the market, thereby increasing
competition, promoting overall higher productivity and consequently, lowering
prices over time. The ultimate effect
of this chain of activities is increased gains for the people of Nigerians who
would be getting the most out of their
natural resources. The government
deregulation in the tele-communication,
there ahs been a reduction in call tariffs. The some similar
success has also been achieve by the
banking sector which brings the emergence of
stronger and better banks in the country, with unprecedented spread to several other
African Countries. These are classic
examples of kind of positive effects of deregulation oil sector.
Deregulation of the down stream sector will further
reduces economic waste and lighten social burdens caused by government control.
For several years Nigeria experienced scarcity of
petroleum products that crippled
national economic activities and increased the cost of doing business, several. The resulting scarcity inevitably leads to a flooding of the market with adulterated products, which
usually lads to the damage of
vehicle and machines. Several occasion,
and in many part of the country particularly outside of the big
cities and towns, a majority of Nigeria have been forced to buy petroleum products
at 300%
higher than their original price . deregulations will help this price scalping and a host
of associated problem related to
the sector. Deregulation of the
petroleum down stream sector
promises to be the
way forward in expanding opportunities for
economic growth and a competitive down stream oil sector if regulation
in the downstream sector is limited to
oversight and supervisory functions, aimed
at guaranteeing quality of
products and preventing consumers exploitation
then the process of deregulation could help achieving greater cost
–effectiveness.
PETROLEUM PRICING
Accurate and appropriate pricing of petroleum products
is one of the major factors that will attract private investment into Nigeria down
stream petroleum sector. This is as a
result of prices of petroleum products will be set by independent
marketers based on demands and
supply of the products like every
others goods and services in the
market place, independent oil marketers
would lead to further reduction
in prices for refined oil products until
an appropriate market price is attained. The
government of Nigeria
continuation of the subsidizing
the down stream will not help to achieve the appropriate pricing required.
There by deregulation through subsidy
removal will lead to adjustments that will push prices
towards its market – determined
level. Pricing that
achieved through this policy will make activities to private
domestic and foreign investor,
BENEFITS OF DEREGULATION
The country has witness tremendous charges in the deregulation of the down
stream, petroleum sector, even the
countries refineries have been working relatively well, and this has led to
increased capacity utilization from 30% to
the current 60%
this means that the country
refined petroleum production capacity
has been steadily on the increase to
further improve on this to an
internationally accepted level of 90%
capacity utilization in the next
years. Now the original contractors
responsible of the building of the refineries have been contracted to
carry out a turn around
maintenance of these refineries as a result of deregulation
the turn around maintenance has help in
carry out the rehabilitation of the port Harcourt refinery which will take
place in the 1st quarter of the year following the
Kaduna refinery and then the
Warri refinery, thereafter, the normally
cycle of the turnaround maintenance will be respected.
Research has shown that even if the refinery in the country were to operate at full capacity, there would
still be a petrol supply gap of about
15 millions litres per day . therefore, importation will remain
inevitable until additional refining capacities are built through the on-going Greenfield refinery project. These has lead in the calling of prospect
investors into the down stream
sector, through deregulation process.
CONCLUSION
Government has a number of competing
for the limited financial
resources at its disposure and fiscal resources are needed to implement
pilot alleviating measures . Moreover, one of the
pillars of the transformation
agenda guiding current policy stance is fiscal consolidation.
To pilot the
alleviating measure will require
additional budgeting finances for
their implementation. Budgeting
additional financial resources for piloting
alleviating measures will run counter
to this policy goal.
Therefore, government aim to use the resources freed
from he subsidy removal through deregulation to implement the identified alleviating measures.
REFERENCES
1. Khan, Sarah A. Nigeria: The Political Economy of oil Oxford
University Press 1994.
2. Kupolokui, Funsho, Liberalization the Experience of the Nigeria Petroleum Sector
Alexander Gas and Oil Connection Volume
10 Issue No 2 , 27 Jan. 2005