The Impact of Deregulation on the Strategic Management of the Petroleum Marketing Firms in the Nigerian Downstream Sector

Abstract

In the past decade or so, Nigerians have been traumatized by the impact of fuel crises.

Lives have been lost and some productive enterprises have either gone under or operating far below optimal level as a consequence of fuel supply shortage and unpredicted high pricing associated to the mismanagement of the downstream sector of the petroleum industry.

The federal government is aware  of this problem and decided to appoint a committee of technocrats to  chart a  new mode of operating the downstream sector.

The committee recommended a paradigm shift from regulation to deregulation of the downstream sector. The sector was deregulated.

Until then however, very little was known about deregulation in the Nigerian economy particularly in the running of public utilities in which the petroleum industry is a foremost concern.

The study examined amongst others, the nature of benefits that come from  the  deregulation of the sector, the process of strategic change in a new business environment by firms in the downstream sector of the petroleum

industry with a view to determining the impact of deregulation on the strategic management of these firms and to ascertain the risks associated with strategic change in terms of impact on the growth of the firms.

Also examined are the best practices in the global petroleum industry, an analysis of the strategies for deregulating the Nigerian downstream sector in petroleum marketing firms.

Introduction

1.1 Background of Study

All over’ the world, reasons for reforms in the public sector vary from country  to country depending on the objective, peculiarity and the circumstance that the country finds itself.

The issue of reform of the Nigerian downstream sector refining and distribution of petroleum products has been on for quite some time.

It has however, become more compelling in the last few years given the trauma of scarify of petroleum products that the nation has continuously witnessed.

Prior to 1965, petroleum products domestic requirements were met entirely through importation under a deregulated environment.

By 1965, it had become apparent that the nation, haven gained independence five years earlier, could no longer rely on important for its entire requirement.

Consequently, the first refinery in Nigeria – the old Port Harcourt refinery was built in 1965 as a commercial venture to provide petroleum product at market related prices.

It was a 35,000 bard per day refinery jointly owned by shell (25%), British Petroleum (BP) 25%, the Federal Government (20%), and the three regional governments (10% each), (Kopolokun, 2004).

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