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% thi
s 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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