DEREGULATION POLICY AND ITS BENEFITS - PETROLUEM SECTOR

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 means

DEREGULATION 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
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