INTRODUCTION:
Deregulation policy has been globally
embraced by many countries of the world, in order for these countries to lessen
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 details some of the
pertinent question that have arisen
about what deregulation in this sector meansDEREGULATION OF THE DOWN STREAM SECTOR
Deregulation of
the down stream 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 compete elimination of the laws that govern smooth operation of activities in the down stream oil or
petroleum sector. But in a non- shall
this means the role of government in this
sector will be limited mainly to providing regulatory oversight. Deregulation of the down stream 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