CHAPTER ONE1.1 INTRODUCTION Nigeria is endowed with vast natural resources including such minerals as petroleum, limestone, tin, natural gas and others (Anyanwu et al, 2007:3). All these minerals have remained untapped, except petroleum which had dominated Nigerias economy since the 1970s. Today, petroleum is by far the most widely used energy resource world wide. Its production and distribution, according to Asimi (2005:8), affects the relations among nations and even the purchasing power of some individual citizens. The first discovery of oil in commercial quantity in Nigeria was made in 1956. Shell- BP was the principal company undertaking oil exploration and production activities in the country, although there were sporadic explorations by other companies, prior to that date (Gidado,1999:53).

According to him, Nigerian government did not embark on serious oil policies for the country until 1967. The rapid inflow of oil revenue to the country in the early 1970s, led to the complete abandonment of agriculture which was Nigerias mainstay of economy. It was observed that since the beginning of oil production in commercial quantity, Nigeria has been rated high, the world over, such that she is declared Africas second largest producer after Libya, eighth largest exporter in the world and the worlds tenth largest oil reserves (Omotoso, 2010:2). Since Nigerias first export of crude oil in 1959, it has become the major contributor to the countrys economy, and that is why over 80 percent of the countrys foreign exchange earnings come from the oil sector. Nigeria has been enjoying consistence increase in the revenue from oil. Following steady increases in the sales, receipts swelled as well from 300 million dollars in 1970 to 4.2 billion dollars by the end of 1974, when oil production was 2.3 million barrels per day (Asimi, 2005:8). By 1976, oil revenue had risen to 6.3 billion naira and in 1980, the peak of 12 billion naira was achieved (Nigerian oil Directory, 1993: 53). Considering the current price of crude oil in the international market, which stands above 70 dollars a barrel, the revenue accruing to the country, has equally increased correspondingly. The huge revenue notwithstanding, one may be tempted to ask, if this God-given commodity has brought curse instead of blessing, since Nigerian people are yet to have smiling faces right from the inception of oil production and exportation in the country. It has been protests galore against short supply and steady increases in the pump prices of refined products. In order to cushion the effects of these increases and reduce direct burden on the citizenry, the federal government instituted the policy of subsidy. The essence of this policy option was to reduce the prices of the products, but at the expense of the federal government that was paying whooping amount of money. For instance, the sum of about 2.5 trillion naira was spent on fuel subsidy by the federal government between 2006 and 2009, and 600 billion naira budgeted for the fiscal year 2010 (Movement for Economic Emancipation,(2010:10). But what really disturbs the minds of many Nigerians is that despite the huge expenditure on subsidy, the prices of refined products continue to rise incessantly, hence consumers buy them at a rate higher than expected. Ezeagba (2005:43), asserts that a situation of subsidy exists, when consumers are assisted by the government to pay less than the market prices for the product they are consuming. That is why the essence of the subsidy in the present circumstance in Nigeria, is to reduce the official pump prices of petroleum products paid by Nigerian consumers. It is unfortunate to observe the deteriorating nature of the countrys social amenities, critical infrastructure and other development indices, when trillions of naira are believed to have been spent on subsidy. It is therefore, against this background that this paper seeks to examine deregulation of the downstream oil sector and to ascertain whether the policy would solve the problem of scarcity and incessant increases in the prices of petroleum products, which to my own mind have caused a lot of instability in the economy of this country

1.2 BACKGROUND OF THE STUDYPetroleum products supplies have always been an acid test for successive Governments in Nigeria. With the new democratic dispensation, the supply and distribution of petroleum products improved but this was without a price frequent increase in petroleum products prices. With few months to the end of the regime, the ugly incidence of petroleum scarcity surfaced again and one begins to wonder if there is any solution to this problem.The contemporary passion and tension that usually characterise petroleum discourse is due to inexplicable deprivations and sufferings of Nigerians amidst plenty and abundance of these products. As the 6th largest producer of petroleum, it is a paradox that in the past decade, supply of all products has been erratic and on sharp decline. Ironically, as supply declined, products prices have been on the increase as successive governments searched for appropriate pricing.The combined impact of erratic and inadequate supply and unending price increases have brought untold hardship to the citizenry and worse too, prevented economic recovery as promised by the present democratically elected government given that capacity utilization in the manufacturing sector nose-dives due to shortages of industrial products. Indeed many industries have been compelled to close due to non-availability of some of these products.In the bid to solve the problem in many developing countries, structural reform of petroleum markets has become a critical component of macroeconomic liberalization policies. The role of the government in the petroleum sector is being redefined, and markets are being deregulated (i.e state interventions such as special treatments of state-owned oil companies, price controls and monopolies are being broken up). Increasingly, the private sector is participating in more competitive environment.But unexpectedly, the outcome of the deregulation has not been encouraging. There has been continuous increase in petroleum prices with persistent scarcity of petroleum products. It was expected that deregulation would give room for competition which would transform to price reduction and excellent supply and distribution network. This study is devoted on the evaluation of the deregulation exercise; critically appraising its impact on petroleum pricing, consumption and the general living standard of the people.

1.3 STATEMENT OF THE PROBLEMHistorically, major petroleum marketing companies were the main sources of petroleum products supply. The companies transported and distributed the products relying on their distribution and retail outlets. This was an era of deregulation in which Nigerian paid market-determined prices for products. However, this arrangement was not sustainable given that it was dependent on the profit and market imperatives of the oil marketers.The countrys economic activities expanded in the seventies such that private companies could no longer cope with increase demand for products. This resulted in erratic supply of petrol and kerosene and ultimately acute scarcity of the product. The shortage was endemic and created social and economic dislocation in the country. This market failure made government to venture into petroleum products marketing and distribution.The concern by government to overcome this lack of policy and total dependency on oil companies led to policy shift towards regulations. Government therefore introduced uniform pricing to satisfy domestic demand, strengthen self-reliance and avoid a situation in which the oil companies could hold the country to ransom.The nation witnessed adequate supply of petroleum products up till 1986. Thereafter, due to the sustained devaluation of the Naira on account of the implementation of the Structural Adjustment Programme (SAP) coupled with the non-maintenance of the refineries, domestic production was soon undermined making it imperative for demand to be met through imports. The shortages of petroleum products escalated inspite of increases in prices of products since 1990.1.4 SIGNIFICANCE OF THE STUDYThis study is significant in the followings ways:a. It would use a market structure-conduct-performance framework to analyse the industry, both before and after deregulation, as a means of judging the impact of deregulation in terms of petroleum products prices.b. The significance of this study also lies in the fact that it would contribute to existing literature on the subject matter by providing an expository analysis of the pattern of increase of petroleum products prices in Nigeria. This would enhance policy formulation in the downstream oil sector with the intention of alleviating the suffering of the masses.c. It would also be an invaluable tool for students, academic, institutions and individuals that want to know more about the deregulation of the downstream sector of the Nigerian oil industry.1.5 AIMS AND OBJECTIVES OF STUDYThe aim of this study is to appraise the deregulation exercise that was carried out in the Nigerian downstream oil sector.The specific objectives of this study are as follows:(i) To evaluate the pattern of petroleum products prices in Nigeria;(ii) To examine the consumption pattern of petroleum products before and after the deregulation;ii) To examine the impact of the deregulation of downstream oil sector on petroleum products pricing in Nigeria;(iv) To investigate the effect of the deregulation of the downstream oil sector on the living standard of the people;(v) To examine the pre- and post-deregulation era and make critical comparism;(vi) To explore the reasons why deregulation has not yielded the desired result in terms of prices and supply.1.6 RESEARCH QUESTIONSThe study would examine the following questions:(i) What is the pattern of petroleum products pricing in Nigeria over the years?(ii) How has the deregulation exercise impacted on the consumption pattern of petroleum products in Nigeria?(iii) To what extent has the deregulation of the downstream oil sector impacted on petroleum products pricing in Nigeria?(iv) How does the regulated downstream sector differ from the deregulated era?(v) Why are we still witnessing petroleum products prices increases after deregulation?1.7Research HypothesisThe following research hypothesis will be testedHypothesis OneHo: Deregulation of the downstream oil sector has not impacted on petroleum products pricing in NigeriaHi: Deregulation of the downstream oil sector has impacted on petroleum products pricing in NigeriaHypothesis TwoHo: The regulated downstream sector do not differ from the deregulated eraHi: The regulated downstream sector differs from the deregulated era

1.8RESEARCH METHODOLOGY AND SOURCES OF DATAThe method of data analysis to be used shall be a time series showing the pattern of the petroleum products prices before, after and during the deregulation exercise.Secondary data shall be the basis of analysis in this research work. The data shall be sourced from the publications of Nigerian National Petroleum Corporation (NNPC), Petroleum Products Pricing Regulation Agency (PPPRA), Central Bank of Nigeria, and National Bureau of Statistics. The secondary data shall cover the period between 1986 and 2010.

1.9SCOPE OF THE STUDYThis study examines economic rationality behind deregulation of the downstream sector of the Nigerian oil industry. The study seeks to investigate the effect of the deregulation on the prices and consumption of petroleum products as well as its impact on the living standard of Nigeria. The empirical analysis is restricted to the period between 1986 and 2010 because it was during the period that policy was implemented.One of the major limitations of this study is that the period of time given by the institutions authority for the study would not allow for an in-depth coverage of all the issues connected with the topic under study, and collection of related information.Also, certain information required in order to highlight and analyze some observation may not be accessible e.g. Independent oil marketers operation records may be regarded as strictly confidential and would not be divulged to the research. And lastly finance is another constraint to an indebt study of this topic.

1.10ORGANISATION OF THE STUDYThis study shall contain five chapters. The first chapter shall contain the background of the study, the statement of the research problem, the objectives of the study, the research questions etc that would guide the study. Chapter two would present the literature review on the subject matter. The methodology to be adopted in the study would be stated in chapter three. Chapter four shall focus on the presentation and analysis of collected data. The last chapter chapter five, would present the summary of the findings, conclusion and appropriate recommendations.

1.11HISTORY OF NNPCNNPC was established on April 1, 1977 as a merger of the Nigerian National Oil Corporation and the Federal Ministry of Mines and Steel. NNPC by law manages the joint venture between the Nigerian federal government and a number of foreign multinational corporations, which include Royal Dutch Shell, Agip, ExxonMobil, Chevron, and Texaco (now merged with Chevron). Through collaboration with these companies, the Nigerian government conducts petroleum exploration and production. In 2007, the head of the Nigerian wing of Transparency International said salaries for NNPC workers were too low to prevent graft.The NNPC Towers in Abuja is the headquarters of NNPC. Consisting of four identical towers, the complex is located on Herbert Macaulay Way, Central Business District Abuja. NNPC also has zonal offices in Lagos, Kaduna, Port Harcourt and Warri. It has an international office located in London, United Kingdom.NNPC Organisational StructureThe NNPC Group comprises the NNPC Board, the Group Managing Director's office, Eight Directorates as listed below. Each of the Directorates is headed by a Group Executive Director (GED). Its Divisions are headed by Group General Managers (GGM) while its subsidiary companies are headed by Managing Directors. NNPC has two partly owned subsidiaries and 16 associated companiesDirectorates: Exploration and Production Refineries and Petrochemicals Commercial and Investment Finance and Accounts Corporate Services Gas and Power Divisions and Subsidiaries:DivisionsSubsidiaries

Engineering and Technology DivisionNigeria Liquefied Natural Gas Ltd (NLNG)

Crude Oil Marketing DivisionNigerian Petroleum Development Company (NPDC)

Research and DevelopmentNational Engineering and Technical Company (NETCO

National Petroleum Investment and Management ServicePipeline and Products Marketing Company (PPMC)

Frontiers Exploration ServicesNigeria Gas Company (NGC)

Liquefied Natural Gas DivisionIntegrated Data Services Ltd (IDSL)

Group Public Affairs DivisionWarri Refinery and Petrochemicals Company Ltd

Special ProjectsKaduna Refinery and Petrochemicals Company Ltd

Renewable Energy DivisionPort-Harcourt Refinery and Petrochemicals Company Ltd

Nigerian Content DivisionNNPC Retail Ltd

Upstream Business Development DivisionNigeria - Gazprom ltd (NiGaz)

Group Human Resources DivisionNigeria-Korea-Malaysia Shipping Company Ltd (NIKORMA)

Audit DivisionNigeria-Daewoo Shipping Company (NIDAS)

Information Technology DivisionHydrocarbon Services Nigeria Ltd (HYSON)

NNPC Medical Services DivisionNNPC Pensions Fund Ltd

Corporate Planning and Development DivisionDuke Oil Services

Gas Master PlanCalson Bermuda ltd

Green Field RefineriesNNPC Properties Ltd

Power Division

Finance Division

Accounts Division

Downstream and Non-Oil Business Development Division

Regulatory Compliance and Policy

Nigeria-Daewoo Shipping CompanyNigeria-Daewoo Shipping Company (NIDAS) is a joint venture between Daewoo Shipbuilding & Marine Engineering (commonly known as Daewoo) and NNPC. NNPC holds 51% of the JV and Daewoo holds the remaining 49%.InstallationsNNPC has sole responsibility for upstream and downstream developments, and is also charged with regulating and supervising the oil industry on behalf of the Nigerian Government. In 1988, the corporation was commercialised into 11 strategic business units, covering the entire spectrum of oil industry operations: exploration and production, gas development, refining, distribution, petrochemicals, engineering, and commercial investments. The subsidiary companies include:Legal premiseMain article: Energy lawAccording to the Nigerian constitution, all minerals, gas, and oil the country possesses are legally the property of the Nigerian federal government. As such, the oil corporations operating in Nigeria appropriate portions of their revenue to the government, which accrues nearly 60% of the revenue generated by the oil industry in this manner. The revenue gained by the NNPC accounts for 76% of federal government revenue[1] and 40% of the entire country's GDP. As of 2000, oil and gas exports account for 98% of Nigerian export earnings.

REFERENCESAnyanwu., (2007), No Cartel is Big Enough to Determine Fuel Prices Under a Deregulated Regime Daily Sun, Thursday, January 14.

Alimi (2005), Principles of Economics, Nigeria: Immaculate Publication Limited.

Ezeagba, C.E., (2005), Deregulation of Nigerian Economy: Implications for the Downstream Petroleum Industry, Certified National Accountant, July Sept. Journal of Social Science and Public Policy Volume 2, December 201Ojo, M. O. and Adebusuyi, B. S. (1996). The State of the Nigerian Petroleum Industry: Performance, Problems and Outstanding Issues, CBN Economic and Financial Review Vol.34, September.Ozumba, C. C. (1996). Harnessing the potential of the Nigerian Oil and Gas for Economic Development, CBN Economic and Financial Review, DecemberOlayinka C., (2010), NNPC Insists on Deregulation of Oil Sector, The Guardian, Tuesday, March 30, Vol. 27, No.11, 416. Omotosho G., (2010), A Voice of Sense for Nigeria, The Nation. Thursday, March 18 ,Vol.5, No.1336. Onyekwere J., (2009), The Intractable Monster The Week, November 30, Vol. 30, No. 13 Journal of Social Science and Public Policy Volume 2, December 2010

CHAPTER TWOLITERATURE REVIEW2.1 CONCEPTUAL CLARIFICATION OF DEREGULATIONAccording to Hornby (2001:313), deregulation is the freeing of a trade or a business activity, from rules and controls. In his own view, Obioma (2000: no date), understood it to mean the allocation of resources by market forces. He equally saw it as the determination of price by the interplay of demand and supply. It means the withdrawal of government control of resource allocation mechanism, thereby allowing the forces of demand and supply to determine the prices of goods and services. By way of expansion, Ezeagba(2005:43),stated that the fundamental economic objective of deregulation can be summarized as bringing more competition to the market with its attendant increase in economic efficiency and welfare. In his own words, Fawibe (2009:1), believed that deregulation is the removal of government control, withdrawal of state interference, encouraging free market operation, and simplification of governments rules and Deregulation of Downstream Oil Sector in Nigeria: Its regulation for greater market forces. Fawibes view seems to be more comprehensive and incorporating. This is because, government does not end up in withdrawing its control and interference in the day-to-day businesses and activities, but has to prepare an enabling environment for the take-off of a deregulation policy. For instance, government has to allow the price system to be determined by the forces of demand and supply. In addition, the operators should be acquainted with the rules and regulation of the game, for greater market forces. In his own opinion, Akintola(2005:8), described deregulation as removal of government subsidy and the cessation of the price control or regulation by officialdom. He went further to state certain conditions that may necessitate deregulation policy in a country. They include the inability of government to continue to subsidize petroleum products because of competing national priorities and the need to curb smuggling of the products overseas, thereby unwittingly subsidizing other economies. Akintolas view is in order as the mentioned conditions are undoubtedly prevailing in Nigeria today and that is why there are calls from different quarters in the country, to implement the deregulation policy without much ado. 2.1.1 SUBSIDYAgu (2009:286), saw subsidy as a payment made by government to producers to enable them produce and sell at a lower price than they would otherwise. He held the view that it lowers the market price below the factors cost, so that consumers pay less for the good than it costs the producer to make the good. In his own understanding, Ezeagba (2005:45), believed that subsidy exists in a situation when consumers of a particular commodity are assisted by the government to pay less than the market price of the very commodity they are consuming. On the producers side, he saw it as the payment to producers of certain commodities by the government not to produce at all or to augment their income when the price of their product is less than break-even point. Subsidy was defined by Hornby (2005:1476), as money that is paid by a government or an organization to reduce the costs of producing goods or services so that their prices can be kept low. He stated that subsidies can be granted in agricultural area or housing projects. From the above definitions, subsidy is seen as a device employed by government to assist either the consumers or producers to consume or produce certain commodities at prices below the prevailing market prices. It is also an incentive given to either side (consumers or producers) to consume or produce more of the goods in question.

2.2 SOURCES OF PETROLEUM PRODUCTS SUPPLY In Nigeria, there are two distinctive sectors in the oil industry. These are the upstream sector, which comprises exploration and production, and the downstream, which deals with refining of crude oil for local consumption. For the purpose of this paper, the discussion will be centered on the downstream sector. In the downstream oil sector, the products consist of premium motor spirit (petrol), Automotive Gas Oil (Diesel) and Dual Purpose Kerosene (Kerosene). These products are supplied from two major sources: through the local refineries and importation. 2.2.1 LOCAL REFINERIES The primary aim of developing refineries in Nigeria was to refine crude oil produced within the country to meet local demand and possibly to export the excess, if any. To achieve this purpose, four refineries were constructed and commissioned between 1971 and 1989.

Hereunder, is the breakdown of installed capacities of the refineries.

Table 1: Processing Capacity of Nigerias Oil Refineries S/N Refinery Date commissioned Processing Capacity (BPD) 1 Port Harcourt (Eleme) 1971 60,0002 Warri 1979 125,000 3 Kaduna 1980 110,0004 Port Harcourt 1985 150,000TOTAL 445,000

Source: Nigerian National Petroleum Corporation (NNPC), 2000.It was expected that with the total refining capacity of the four refineries at 4445,000 barrels per day, the issue of fuel scarcity in the country, would have been a thing of the past. But, Nigerians were disappointed as refined products were not only in short supply, but disappears quite often in almost all the filling stations in the country. IMPORTATION Importation of refined products came into focus when the turnover from the four refineries could not satisfy the ever increasing demand by Nigerian consumers. In other words, import was mainly as a result of the poor performing state of the refineries (Federal Republic of Nigeria, 2000:19). This is evident in the table below. Table 2: Refining Capacity of the Refineries: S/NRefinery Installed capacity (BPD) Optimum capacity Achieved (BPD) 1 Port Harcourt210,000 190,0002 Warri 125,000 100,0003 Kaduna 110,000 70,000 TOTAL 445,000 360,000Source: Nigerian National Petroleum Corporation (NNPC), 2000. It is crystal clear from the table above that the optimum capacity achieved fell below the installed capacity in each of the refineries. For instance, the Port Harcourt refineries combined together had an installed capacity of 210,000 barrels per day but 190,000 barrels per day was achieved, showing a shortfall of 20,000 barrels per day. Aggregative, a total shortfall of 85,000 barrels per day was observed in the general petroleum products supply. This is true because, the total installed capacity of all the refineries was 445,000 barrels per day while 360,000 barrels per day was achieved. The decline in the refined products was attributed to the poor performance of the existing refineries. According to Ezeagba(2005:43), the poor performance of the refineries over the period (1990-2000) was due largely to problems, such as fire, sabotage, poor management, lack of turn around maintenance (TAM), and corruption, which have left them (refineries), often operating at about 40 percent of full capacity, if at all. He said this has resulted to shortages of refined products, hence the need to increase imports to meet domestic demand.

2.3 FUEL SUBSIDY IN NIGERIAThe issue of long queues experienced by motorists struggling to buy petrol, at filling stations, has become a common phenomenon in a country richly endowed with large crude oil deposit, and a greater exporter of the God-given commodity. It is pathetic to observe that no other OPEC country or even countries that do not produce oil, share similar nasty experience with Nigeria (Badmus, 2009: 25). Prior to this ugly situation, there were moments of joy in Nigeria, when the four refineries were all working at full capacities, and there was no need for queuing to buy fuel. But, according to Badmus, Nigeria could not help relying on fuel importation because under the regime of President Ibrahim Babangida and his successors (Generals Sani Abacha and Abdulsalami Abubakar), the four local refineries could not be managed properly and they fell below the installed refining capacities, thereby making it imperative for demand to be met through imports. The import dependency which constituted over 82 percent of the total supply of petroleum products consumed locally, invoked protests from different quarters in the country. This undesirable situation led to the controversial issue of subsidy, which nearly tore the country into pieces. Subsidy, in the economic sense, exists when consumers of a given commodity are assisted by the government to pay less than the market price of that commodity. In relation to the fuel subsidy, it means that consumers would pay less than the prevailing pump price per litre. For instance, the current official pump price of N65 per liter is still carrying a subsidy of N2.72 per liter of refined product (Chizea, 2009:8). According to him, there is equally a subsidy of about N30 per litre of kerosene, hence, a whooping amount of N640 billion was spent as a subsidy on all the refined products in 2008 alone. The amount spent on subsidy alone was almost the whole of the capital budget estimated for 2009 budget. But the question many Nigerians ask is, to what extent has the subsidy impacted on their lives? This has generated a lot of crises in the country. Man-hours were lost, social amenities and infrastructural facilities which were in short supply were recklessly destroyed, thereby slowing down the rate of economic development. This was why Ayankola (2010:22) suggested for its removal, and the introduction of deregulation in its place. In the same vein, Economists do not like to talk about subsidy because it is often a misallocation of resources (Chizea, 2009:8). In the light of the nations experience with subsidy, Chizea believed that it cannot be encouraged anymore in the countrys present day economic situation. He recalled how the subsidy on fertilizer was hijacked and later became an instrument for political patronage and never reached the intended beneficiaries. He strongly admonished Nigerians to be very careful in recommending the extension of subsidy in our environment. Stressing more on the issue of subsidy, Oketola (2010 :19), contended that it would be difficult to get adequate financing and investment in refineries in a regulated pricing regime. He observed that this country spends approximately N600 million per day on subsidy on petrol and kerosene, while government struggles to fund infrastructure, health, transport and other competing needs. With deregulation, Oketola stated further that government will have more resources available for the provision and financing of education, road construction and equipping of hospitals and improving the power sector. From the foregoing, it is observed that the policy of subsidy has rather done more harm than good to the citizenry of this country.

2.4 DEREGULATION OF DOWNSTREAM OIL SECTOR IN NIGERIA It was argued from different quarters in Nigeria that deregulation of downstream oil sector without adequate local supply, will further aggravate importation and virtually seal all hopes of ever reviving the existing refineries, and gainfully utilizing the vast assets therein (Federal Ministry of Information, 2000:91). To rectify this situation, government had tried to lure private investors to float refineries and assist to end the fuel crisis in the country, but so far, no serious private investor had taken up the challenge. But Adeogun (2010:43), contended that the quest to attract private investors into the petroleum refining business may remain a pursuit in futility, as no investor would be willing to invest in the sector under a price regulated regime. This implies that the existence of functional refineries is significantly dependent on the introduction of effective deregulation policy. This was the reason why the Nigerian National Petroleum Corporation (NNPC) on behalf of the federal government and China State Construction Engineering Corporation (CSCEC), on 31st May, 2010, signed a Memorandum of Understanding (MOU) worth N4.2 trillion, for the building of three new refineries (Okpole, 2010:9) According to him, the move is to accelerate the birth of refineries and stem the flood of imported refined fuel currently estimated to cost about N1.5 trillion yearly. Okpole was of the view that the successful building of new refineries will no doubt reinforce deregulation of the downstream sector of the nations petroleum industry. He equally believed that they (new refineries) will add some capacity of 750,000 barrels per day to Nigerias refining infrastructure and position NNPC to engage profitably in the international trading of refined petroleum products.It is unfortunate to observe however, that while the government was making frantic effort to resolve the fuel crisis in the country, there were nefarious groups of individuals who have been working strategically against such effort. For instance, there exist a syndicate believed to be responsible for the dysfunctional state of the nations refineries so as to continue to import finished products at a price determined by them(Onyekwuere, 2009:19). According to him, President Umaru Musa Yar Adua in May 2009, attributed the problem in the oil sector to the handiwork of cabals. It is believed among most Nigerians that, it was corruption that crippled Nigerias refineries. One school of thought was of the view that unless corruption is wiped out in Nigeria, there is no way Nigerians will progress as a people. For instance, why will the federal government go to Senegal, a small country that does not have crude oil deposit, to import refined petroleum products? (Aturu, 2009:20). This has been the handiwork of the groups in the country that have been undermining the efforts of the government, to resuscitate or build new refineries. The proposal was always killed by them, for fear of loosing their source of income. This was because it would put an end to their import racket, thus taking business away from their outside collaborators (Onyekwere, 2009:23). Their activities in Nigerias oil sector have been causing a lot of worries in the country and that is why the campaign for deregulation of the sector should be strongly encouraged. The activities of the economic saboteurs notwithstanding, the government has continued to hold positive view about the implementation of the deregulation policy in the country. The government believes that the policy will no doubt make the products available and even cheaper. It contended that deregulation is most needed presently in Nigeria, especially, this time when the government is finding it very difficult to sustain fuel subsidy which has gulped large amount of public money. The government believes that through deregulation, the level of distortions and corruption existing in oil transactions, will reduce drastically and will offer Deregulation of Downstream Oil Sector in Nigeria:. This is because the oil market will become more efficient and the result will be passed on to Nigerians in the form of lower prices and better quality of service (Olayinka et al, 2009:1-2). In his own view, Okiti (2009:60), stated that the importance of the deregulation of downstream oil sector cannot be overemphasized, since its process must ensure that there are competitive incentives that serve as a platform for greater generation of wealth than the savings the government hope to make. He contended that the end game of a deregulated environment should be a vibrant, competitive, investment and employment generated sector. In line with other protagonists of the deregulation of downstream oil sector in Nigeria, Fawibe (2009:7), gave some reasons why government wants to deregulate the sector. They include: burden of subsidy on national treasury; strain of financing Nigerias state-owned petroleum businesses; intra and trans ECOWAS smuggling of Nigerias oil products; relative market prices of oil in the ECOWAS Sub-region; inability to attract investment in midstream while licensed refineries could not operate and the high cost of maintaining the refineries. He was of the view that the Nigerian government should deregulate the downstream sector, so as to revitalize the countrys ailing economy and equally provide all the necessities of life to her teeming population. Finally, he opined that, if the policy is properly implemented, it will no doubt bring increase in foreign investment in Nigeria, increase in competition, availability of products, predictable prices of products, end of price-fixing regime, appropriate accounting of the oil revenue, and reduced corruptive tendency in the sector (Fawibe, 2009:10). According to Braide (2003) quoted in Ezeagba (2005:43), there are certain processes which deregulation must undergo before it succeeds in Nigerian context. They include supply side and complete deregulation. In the supply side, the writer stated some underlying assumptions, which consist of the federal governments sensitivity to the inadequacies of the existing statedowned petroleum refineries and refined products; supply and distribution system and desire to maximize supply sources for the refined products market in the country; federal governments monopoly of pipeline operations and primary distribution from the stated-owned storage depots would be completely abolished; local and foreign private investors would be willing to take over the dilapidated refineries and operate them efficiently and profitably; private refineries would be able to procure crude oil at competitive rates and sell their refined products profitably. Also, private importers would procure refined products and sell such at deregulated prices. Most importantly, barriers to new entrants in private refining and depot operations would be eliminated (Ezeagba 2005:43). However, government would refurbish all state owned refineries, pipelines, storage depots, prior to their final acquisition by private investors. This is preparatory to the complete deregulation of the downstream oil sector in the country. Ezeagba (2005:43), has confidently assured Nigerians that the state-Owned downstream petroleum sector can be effectively taken over by qualified private Nigerian investors. He believed that they will manage them comfortably, efficiently and profitably. In addition, unnecessary impediments, including the existing overbearing procedures for granting licences to private refineries and other potential investors must be abolished by law with maximum dispatch. He opined that there must be open access to state-owned monopolistic facilities such as jetties, storage tanks, and pipelines through nondiscriminatory tariffs to private operators. Ezeagba stated unequivocally, that price fixing in any guise by the government must stop. It is observed from the foregoing that there are certain important underlying conditions that must exist before the introduction of deregulation policy in any economy, most especially in the downstream oil sector. The conditions as pointed above by Ezeagba, are necessary and sufficient, which in my opinion, the government of this country should not hesitate to implement, if a successful deregulation of the downstream oil sector would be achieved in Nigeria.

2.5 IMPORTANCE OF FULL DEREGULATION IN A POST-PIB ECONOMYThe most topical issue in Nigerias oil and gas industry, arguably the most vibrant in Africa right now is the Petroleum Industry Bill,(PIB) and the only reason it would come before full deregulation of the downstream oil sector is simply because it has being programmed to encapsulate the subject matter.The PIB has since been approved by the federal Executive Council and has been forwarded to the National Assembly for proper scrutiny and ratification after which full implementation is expected. This report however takes a look at the prospects of a full downstream sector deregulation after the passage of the bill as well as its importance especially in the face of in-depth corruption currently ravaging the downstream oil sector by virtue of the Petroleum Subsidy Fund (PSF).Excerpts:On January 1,2012 the Goodluck Jonathan led federal Government announced a shocking and unexpected stoppage to the Petroleum Subsidy Fund,(PSF) thereby signaling an immediate sharp increase in petrol pump prices across the country.This action could be so described because the federal government seemed to have allowed an atmosphere for dialogue with the people as governments selected representatives made up specifically of the economic team and a few other notable individuals met with the peoples unelected representative consisting of the civil society groups, human rights activists and the media to discuss the all-knotty issue of subsidy removal/deregulation.However the governments action was sudden as it was generally presumed that dialogue on the matter was still ongoing, but the action is all history now. The action ofgovernment was to signal moves towards deregulation of the downstream sector, but analysts were of the opinion that deregulation cannot achieve its aim when implemented in piecemeal and as such the removal of fuel subsidy alone cannot address the issues and should have come at the tail end of the deregulation exercise.This report however is more concerned with the importance of deregulating the downstream oil sector after the passage of the much awaited PIB. The downstream sector has lived on importation for far too long and the reason for this is traced to the neglect over the years of oil pipelines earlier constructed to transport refined products across the country as well as the total collapse of almost all the nations refineries situated at Warri, Port-harcourt and Kaduna.Now questions have been asked on why the country cannot simply shore up its refining capacity to meet local demands, but rather chooses to depend solely on importation of refined products even to detriment of economic growth and in the face of 2.4 million barrels of daily oil production.It is important to note that the PIB when passed would be incomplete if the issue of deregulation is not treated with the importance it urgently requires. It is also of note that in view of recent happenings and discoveries in the oil industry, the country must deregulate if it must be rid of the corruption which have so badly permeate the system.

2.6 CURRENT STATE OF THE NATIONNigeria, Africas highest exporter of crude currently consumes approximately 60 percent of all petroleum products imported into Sub Saharan Africa. In 2010 alone, over 6 Million Metric Tons of petroleum products was imported into the country. Of this volume, The majority (73%) was for PMS importation. As a Nation, The subsidy on Premium Motor Spirit (PMS) amounted to 25 percent of the governments total expenditure in 2010. This mode of public spending has however with recent developments proved to be grossly unsustainable.Dependence on ImportThe Nation produces its own crude, and also has 4 refineries in port-Harcourt, Warri and Kaduna with a combined capacity (at full operation) of 450,000 barrels per day. The initial plan was to leverage on this production and refining capacity to supply petroleum products to the nation.Unfortunately, a combination of factors such as the growth in population and therefore demand, the ineffectiveness of existing product transport infrastructure as well as the inefficiency of the refineries has led to a situation where the country is a net importer of petroleum products.It is a fact that even in a case where all the refineries operated at a hundred percent efficiency, they would barely meet half of the existing national demand and this is what has originally brought about massive importation of petroleum products into the country.However, an industry analysts who spoke to this writer on the condition of anonymity posited that the measure was originally thought to be temporary to enable ample time for the repairs and rehabilitation of the nations refineries and pipelines, this, according to him would in effect bring down the volumes of imported products into the country.This was to be done while government is also building more refineries to at least meet up with national daily consumption demand, but all of this was not implemented therefore encouraging corruption through the PSF scheme and the rest as they say is history.Deregulating the downstream sector would however put an end to the following, Lack of investment in refineries , Excessive, dependence on imports, Supply and demand imbalances leading to shortages, Smuggling/Leakages, Inadequate Port and Reception Capacity, High Distribution and storage costs, Uncompetitive market structure, Inefficient Pricing structureRent seeking, Budgetary pressure from unsustainable subsidy payment, these factors amidst others are the reason our economy only grows theoretically and never practically and the cheapest and most sustainable way to check these is through by deregulating the downstream sector of the oil industry and allowing different investors both foreign and domestic to invest across the value-chain, from refining to pipelines to storage depots etc.Reasons for subsidyGiven the fact that importation of petroleum products is inevitable, the nation would be exposed to extreme price instability due to the volatility of international markets. If we couple this with the fact that Nigeria is one of the largest producers of crude oil, a justification may be made for the subsidization of the refined crude oil products for Nigerians.Unfortunately, this subsidization has come at the price of economic development and has become an untenable position for the nation. In 2010, the subsidy contribution from the Federation was 1.2 Trillion Naira ($8 Billion) and the 2011 Subsidy payment is projected to approach approximately 1.5 Trillion Naira ($10 Billion).It is clear that these funds may be channelled towards better causes that will accelerate economic development and allow the nation to better plan its expenditure, and as can be seen in recent happenings in the sector, subsidy has brought about intense corruption such that a developing nation which is in dire need of resources for developmental and other projects even as it is currently indebted to foreign nations is now having controversies over 403 billion naira, about 2.458 billion dollars, and how to recover this sum. This money would have been better utilised if there was deregulation.2.7 NOTABLE CHALLENGES/ SOLUTIONS TO DEREGULATIONThere have been concerns raised over deregulation as it would signal the removal of subsidy. It is however notable that nothing comes without challenges, and if allowed to succeed with intense supervision on the multiplier effect it would turn as the best decision for the country. Some of the concerns raised includes:Increase in Transportation Cost: It is a common assumption that transportation cost will increase along with the removal of the subsidy. While this will be true in the case of passenger vehicles, most interstate transportation is run on Diesel fuelled vehicles. Some states, e.g. Lagos, also have intercity transportation that is fuelled by Diesel powered buses.Diesel is a deregulated product and as such will not undergo a price increase based on the removal of subsidy from PMS. Increase in Prices for Goods and Services: The perceived increase in the price of goods and services is also a concern that must be quickly addressed to avoid an actual increase based simply on the expectation of one.Goods such as farm produce are transported across the country on diesel powered trucks. Many services rely on generators due to the frequent interruptions to power supply but even these organizations run on diesel powered generators. In a case where petrol generators are used, a switch campaign to diesel generators should be undertaken so people realize the advantages of diesel over petrol for power generation.Hence the small and medium scale services which can only depend on petrol generators for obvious reasons would have need to review their costs, and as such government may want to consider initiating a policy that would bring down the cost of diesel engine generating sets so small income businesses which hitherto was running on petrol would switch diesel in order to reduce costs.Misappropriation of Public Funds: This concern can be addressed by simply articulating the uses for the realized funds. The Sovereign Wealth Fund has been mentioned as a replacement to the Excess Crude Account which funds the Subsidy. This fund would address the nations Infrastructure deficit and drive down the price of all goods and services (including PMS), stabilize the Naira, and also allow the federation to plan for future generations.The final word on these challenges simply put, is that the benefits of subsidy removal are not in dispute, once the methods of converting the realized savings to greater value for the populace is agreed upon, articulated to the nation and implemented to the letter, this and only this is what would make the deregulation exercise work, and it would also attract investors as the government need not travel the world to woo investors, these ones can see how serious we are economically and would be willing to invest uninvited if the atmosphere is suitable and government is seen to keep to its words at all times. 2.8 SHOULD NIGERIA DEREGULATE ITS PETROLEUM DOWNSTREAM SECTOR?As the sixth largest oil exporter in the Organization of Petroleum Exporting Countries (OPEC), Nigeria is endowed with abundant quantities of oil, subsequently the country has generated billions of dollars as revenues from oil since the last four decades when oil was first found in the country. Despite the enormous revenues Nigeria gets, the benefit has not reflected into the lives of ordinary citizens in the country and the Nigerian Economy is continuously confronting challenges, this may have resulted from inefficiencies, corruption, abuse of Natural Monopoly Powers, mismanagement, smuggling, bureaucratic bottlenecks and excessive subsidy.

The Nigerian Oil industry is separated into two sectors: the upstream sector and downstream sector. Upstream sector deals with exploration and production while the downstream sector deals with refining and distribution of crude oil for domestic consumption. This analysis only focuses on the downstream sector and issues relating to its deregulation especially removal of subsidy in Nigeria, this is because the Downstream sector has a significant impact on the lives of all Nigerians especially on how the sector operates. Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation does not mean elimination of laws against fraud, but eliminating or reducing government control of how business is done, thereby moving toward a more free market.Nigerian downstream sector is managed by the government through the National Oil Company Nigerian National Petroleum Corporation (NNPC) which was given the powers and operational obligations in refining, Petrochemicals and products transportation as well as marketing. Oil refining in Nigeria dated back to 1965 when the first refinery was built. Presently, the country has four refineries with the total capacity of 445,000bpd but operates below its optimal capacities. The supply of Petroleum products and management of pipeline networks that link these refineries to bulk customers is undertaken by the NNPC subsidiary known as Pipelines and Product Marketing Company (PPMC). The bulk customers otherwise known as dealers supply the products to the millions of customers throughout the country. These products include Petroleum Motor Spirit (PMS) otherwise known as Gasoline, Automatic Gasoline (AGO), Household Kerosene (HHK), Fuel Jet and Liquefied Petroleum Gas (LPG).In the 1990s, due to the increase in demand for Oil Products, which outweighed its supply, it became necessary for NNPC (as a state owned Enterprise) to import heavily from abroad to meet the escalating demand, and as a result, the revenue generated from crude oil export had to be used to import refined products in to the country. Currently, Nigeria imports 85% of refined products. This has exposed the country to difficulties in funding subsidies on the refined petroleum products, the country had to borrow from International Financial Institutions to maintain this subsidy and also spent more to service the debts. Consequently, the country entered a difficult situation where meeting the major budget needs of the government became difficult.

Considering the fact that international oil prices were increasing and the real refined production in the country was dropping the government decided that it could no longer afford the continued subsidies in the pump price of the fuels because it was purchasing refined products at huge international prices only to sell at a heavily subsidized rate. Presently, one litre of Petroleum Motor Spirit (Gasoline) is regulated at N65 (US$1=151.38 Naira, as at 21/4/2010) but the actual cost is expected to be N114.32, therefore for every litre of Gasoline the government pays the difference of around N49.34. However, Nigerians consumed around 32 million to 35 million litres of Gasoline per day. Therefore, Nigerian government pays around N1.6 billion (US$1.1 Million) per day on subsidies. The government claims that despite the huge amount spent, the subsidies did not reach the targeted individuals but rather few higher income groups, it further claims that continuation of subsidies on Petroleum Products limits its ability to deliver its statutory functions such as power generation, security, education health etc. Consequently, the government found it imperative to resort to selling the refineries and invited other local Marketers to apply for licenses to build private refineries. This was not achieved because the marketers who are profit motivated declined their interest to apply as the government still regulates the pump price. Subsequently, the recent government considers it necessary to deregulate and privatized the downstream sector in the country. However, the deregulation process is now facing serious challenges and criticism especially from Labour and Trade Unions, Parliamentarians and the public. It is against this backdrop that this analysis seeks to examine this controversial issue with a view to discovering: whether deregulation could be important and relevant to the country? My analysis employs empirical literature in discovering and analyzing the issues surrounding deregulation and its feasibility in Nigeria.2.9 RATIONALE FOR REGULATION IN NIGERIADisruptions in the Nigerian downstream sector have deeper and more immediate domestic and political implications for the country than those that may occur in the upstream sector (Sarah 1994), hence the need to regulate the downstream sector. Rationale for National regulation is that uniform national regulations are generally more efficient for nationally marketed consumer products (Viscusi, et al, 2005). Generally, government intervention in the petroleum sector either through public ownership or through regulation could be justified to ensure adequacy, reliability and affordability of the petroleum products in a country. Nigeria is not in exception, as part of the efforts to ensure energy security, the government provided subsidies on its critical Petroleum products to guarantee the following:

SUPPORT FOR THE POORNigeria is growing into a more industrialized and urbanized country where movement and appliances that require modern fossil fuels are becoming popular among poor and rich people. However, more than half of Nigerians are living below one dollar per day. Subsequently, the Nigerian Government has deemed it necessary to regulate and subsidised these important ingredients of human lives to make it reliable, adequate and affordable to the poor (majority group of people in the country). The government resolve was due to the appreciation of the fact that the poor man cannot afford the real prices of petroleum products, this came as a relief and support to the poor as the government now pays up to 40% of the price of every litre of Gasoline.

ENCOURAGE PATRONAGE:Traditional energy had dominated Nigerian Energy sector until the last forty years when fossil fuels especially oil and gas were discovered in the country. To transit to new and more energy intensive sources, the Nigerian government introduced subsidies on these Fossil fuels to encourage people to start using them as they are more flexible and energy saving. This worked out effectively, as the traditional energy sources were replaced with Fossil fuels in the country although traditional energy is still been utilized in the rural areas. However, due to the provision of the subsidies the people over concentrated on the exhaustible fossil fuels in their energy consumptions; this will be elaborated in my next article.FEAR OF INFLATIONOil prices are so volatile and Nigeria imports heavily refined products. This accentuates Nigeria as an oil dependent country to highly inflated and frequent fluctuations of petroleum products prices. This is another reason for introducing subsidies to protect the citizens from facing the highly volatile petroleum products prices so that they will continuously face regulated fixed prices.

2.10 WHY NIGERIANS OPPOSE DOWNSTREAM SECTOR DEREGULATION TUCTRADE Union Congress of Nigeria, TUC, has explained that Nigerians oppose the government interpretation of deregulation in the downstream sector of the nations Petroleum industry because it became an instrument for foisting hardship on the citizenry by the government.TUC accused government of mis-representing the facts about de-regulation saying that is why Nigerians perceived it for what it is; a contrivance to hike the prices of petroleum products and make life more difficult for the hapless and hopeless citizens of the country.In a paper on Efficient management of public perception in implementing government policies-De-regulation and local content, President-General of TUC, Comrade Peter Esele said; De-regulation is simply the opposite of regulation and in essence, it means the absence of regulation. In the context of the downstream sector, it is actually supposed to mean the freeing of the operations of the sector from the fetters of governmental controls and dictates and leaving it to run within the ambits of market determined choices.This therefore especially in the area of Pricing, seeks to allow the forces of the market to drive the determination of the prices of petroleum products within the market and removing the pervasive influence of governmental agencies like the PPPRA. It was therefore designed to make the market more efficient eliminating costs that are artificial in the process envisaging in the long run to make the sector more robust, fully domesticated as every facet of it becomes activated tapping into the freedom to eventually drive down the prices of products.If this is the theoretical understanding of de-regulation in the downstream petroleum sector, a rational mind would wonder why it has raised so much dust within the nations polity over time and why Nigerians would have to march on the streets for almost two weeks in resistance to that supposedly laudable policy of government.The quagmire is in the interpretation of government of what constitutes de-regulation. Government agents mischievously decided to couch the hike in prices of petroleum products under the veil of de-regulation. Instead of de-regulation wearing its full meaning, it became an instrument for foisting hardship on the citizenry because there was no truth in what the government was trying to sell to the public.According to Esele, who is the immediate past President of the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, Nigerians are generally not opposed to this policy but are opposed with operational side of this policy which takes away the real meaning of de-regulation and that is why Nigerians made the demand that if de-regulation means price hike then, it is not for us but if it is for efficient downstream operations, then, we are all for it.We can therefore easily accuse government of misrepresenting the facts and that was why Nigerians perceived it for what it is; a contrivance to hike the prices of petroleum products and make life more difficult for the hapless and hopeless citizens of the country.On the other hand, Local content as it concerns the downstream sector is about making the oil and gas sector more domestic driven or internalising its activities by making most of the components of the industry more Nigerian. It ensures that an increasing percentage of the operations of the industry are handled by Nigerian owned businesses and individuals and not by foreigners.This is hoped would help in making the positive multipliers in the industry more impactful on the domestic economy than otherwise. It is envisaged that more and more of the technology and components deployed in the various production activities within the sector and the Service sector of the same industry are indigenous.We have established thus far that the publics interpretation of governments policy especially in the downstream petroleum sector have always been in contradiction with governments understanding of why they embarked on such policies in the first place. Why has governments insistence on altruism in its efforts been met with outright rebuff by the masses or sometimes total indifference? Is it that the citizenry has decided to reject its own government or that there is a gross misunderstanding between the people and the government?Having situated these policies within the context of our analysis, the next logical quest will be to seek an understanding of the factors that have made most of the policies of government within the downstream sector of the petroleum industry very perceptibly disagreeable with the populace.

2.12 DEREGULATION OF THE NIGERIAN DOWNSTREAM OIL SECTOR; KEEPING FAITH WITH A GLOBAL TREND The sticky issue of oil is no longer a new phenomenon in the global political lexicon. Though oil has been in existence for ages, buried beneath the earth as debris, it had enjoyed a steady metamorphose into what we all refer to as crude oil. Oil is also a popular item because of the inevitability of its usage, which as a double-entendre has become a major bane contributing to the rat race, which has reduced the entire humanity into a village. The implication here is that no nation is an island, as what happens in one part of the world ultimately affects the other parts.This has offered the world crude oil production, pattern, supply, distribution and consumption to be uniform, experiencing the same hiccups which send shivers running down the spines of countries that have International crude oil relations. Oil accounts for more than 75% of the worlds total source of revenue, hence at the instance of its pendulum tilting either right or left, nations of the world are forced to scurry for safety. Even the world acclaimed Super Powers are kept on their toes, with OPEC states monitoring supply and proffering solutions on how to checkmate the excesses of some recalcitrant nations from flooding the market with products. Nigeria, as a part of global politics has had her reforms including liberalization and deregulation in the petroleum oil and gas sector driven by the oil phenomena. The reason for this is not farfetched; oil remains the most internationally traded commodities with increased private sector participation. Besides, the oil sector has for years been characterized by improved technology and participation that developed economics have also embarked on the reforms in their various nations to enhance both local and international participation. At the same time, create an enabling environment for private investor participation as it suits them.However, deregulation policy has globally been embraced by several countries, in order to lessening public sector dominance and for developing a liberalized market while ensuring adequate supply of products. For this policy to be successful in these other countries they had planned and mapped out an effective policy response which transcended into full deregulation. Such is the story in Peru, Argentina, Pakistan, Chilean, Philippines, Thailand, Mexico, Canada, Venezuela, Japan and USA, all of which have systematically dismantled their State-owned oil companies, for a significant turning point in the success story of their oil industry reform efforts.The economic reforms of the government become rather imperative since they are geared towards reviving the ailing sectors. The precedence of some sectors that have been fully deregulated and their achievements are so tremendous that Nigerians had forgotten the scares of the initial experiences.Six years ago, government deregulated the telecom sector by allowing the private investors to run the sector thus de-emphasizing government control. The initial prices of sim cards from MTN and other service providers were within the ranges of N25 000-N10, 000 but today, the success story is that sim cards are virtually free by all the service providers, the scratch cards have been reduced to N100 denominations, making it affordable for every strata of the population. Other marketing gimmicks like per second billings were also introduced to motivate would be subscribers. The good news of the telecom industries is ubiquitous, for these past six years, it is not government funding that is oiling the sector but private capital. Interestingly, government is feeding fat from revenues these sectors are generating. However, one thing is clear, consumers have a wide range of options to choose from, thus promoting healthy rivals among operations, with each trying to outwit the other in their marketing strategies. The financial sector; media and most recently the Insurance sector are also experiencing the cyclone sweeping across the sectors. Why then must the oil sector be different?From the countries so far enumerated, Nigeria is not alone in this global trend of attempting to develop its downstream sector through liberalization and deregulation and increased private sector participation. Deregulation of the downstream petroleum sector, as conceived in 2003, involved not just the removal of government control on petroleum products prices, but also the removal of restrictions on the establishment and operations including refining, jetties and depots, while allowing private sector players to be engaged in the importation and exportation of petroleum products and allowing market forces to prevail. Nigeria, ever before this reform had weighed its pros and cons and there is no place in the world where reforms are embraced without agitations. If statistics of nations already adopted deregulation is taken, it will be shocking to know that its take-off met with lots of road blocks. Today, it had paid off, and they are reaping the benefit of their perseverance. For deregulation to be made or marred will depend solely on the generality of Nigerians.If Nigeria should borrow a leaf from these nations and allow the downstream sector to be fully deregulated, we are sure to have a success story to tell. Otherwise, Nigeria becomes an onlooker in the polity of oil producing nations. As the recent events unfold, deregulation becomes inevitable. There is no point running away from grasping reality, effort should instead be made to face the challenges stoically than postponing the evil day that will eventually come. Definitely, somebody has to bear the sledge hammer for posterity to forgive this generation. It is of paramount importance that petroleum tax be implemented because it is a must food to be eaten one day. In these countries where deregulation has been institutionalized, their Tax proceeds are used to fund their social welfare programmes. It would recalled that Nigeria rejected the 1% tax built into the cost of oil simply because they cannot trust their leaders to judiciously and justifiably use the money as it should, but for how long will it last? In so far as the elites, the organized Labour and stakeholders in the country are attuned to what deregulation is, they should deem it fit to help educate and enlighten the populace on the need to embrace deregulation policy. The-playing-to-the-gallery posture by the elites is uncalled for. They understand the intrigues in the global oil setting and the truth of deregulation, rather than the premature assessment and outright condemnation of a baby that is only four years old. If the sector is fully deregulated, then will Nigeria reap the gains of decontrol of the prices of products by government and the transformational changes obtainable in other sectors be witnessed in the downstream sector. Oil is pervasive in nature and affects every sphere of our lives, therefore should be handled with utmost caution. In as much as am sounding like a protagonist of the reforms, I will not hesitate to register my dismay on the shabby attitude of the appropriate authority that ought to have embarked on an aggressive enlightenment programmes to educate the masses on the gains and challenges to anticipate of deregulation and try selling their mandate to the populace. The regulatory authority, PPPRA, should go beyond being only seen as a price-fixing government organ. Its impact must be better appreciated and felt by all Nigerian. PPPRA should also collaborate and cooperate with other regulatory bodies across the globe in its quest to adopting an acceptable benchmark as well as try to enforce compliance when need be. Otherwise, the impoverished and vulnerable masses will continue to suffer under the yokes of the marketers who short-dispense products and sanctioning them accordingly.The Agency should see to it that whenever prices come down or go up in the international oil market, it should also reflect locally. By this, Nigerians would always be willing to adjust anytime there is price increase. That notwithstanding, every hand should be on deck especially the stakeholders in the downstream petroleum sector and government for the success of the policy. Therefore, for global trends in the oil industries not to elude Nigeria, there is need for all and sundry to uphold the philosophy of the deregulation movement, since nations interact at the international oil market. Or, the TITANIC of 1912 will repeat itself. What do I mean? That Nigeria be allowed to toe the way of the trailblazers, knowing that all nations of the world are inescapably sailing on the same vessel perhaps to a common destination so that we can all reach the home port of prosperity. If not, we suffer the fate of the TITANIC, which struck an iceberg and sank in the North Atlantic in 1912, having on board 1513 passengers drowned. Thus, the need for Nigeria to join other nations of the world since we all have a common destiny, which is the crude.

2.12 HOW DOWNSTREAM OIL SECTOR CAN BENEFIT NIGERIANLCLabour in Nigeria has said the only reform the nation needs in the downstream sector of the Petroleum industry, is a comprehensive reform that will confer the maximisation of benefits of oil on the national economy and one that will revive domestic refineries, encourage the establishment of new ones across the country and reduce dependence on imports.Under the umbrella of Nigeria Congress, NLC, Labour argued that domestic products pricing must not be based on import price parity to confer on the domestic economy a competitive advantage based on the resource in which the country is richly endowed.In a presentation to the House of Representatives Ad-Hoc Committee Hearing on Operation of the Subsidy Scheme in the Petroleum Sector, Congress listed revival of domestic refining through existing refineries and promotion of new refineries, re-institutionalisation of a policy of differential between the price of crude for domestic consumption and for export and Promotion of Competition as ways to ensure that Nigerians derive maximum benefits from downstream sector. According to NLC We believe there is a genuine need for a reform of the oil industry. In the upstream today, Nigerians know that crude is being stolen.However, to concentrate on the downstream for now, we support a comprehensive reform which will confer the maximisation of benefits of oil on the national economy. There is need to admit that the existing reforms are not working and that a more comprehensive programme of reform needs to be agreed among all stakeholders.We recommend a reform agenda that will seek to revive domestic refineries, encourage the establishment of new ones across the country and reduce dependence on imports. It is also our contention, that domestic products pricing must not be based on import price parity so as to confer on the domestic economy a competitive advantage based on the resource in which the country is richly endowed.We believe that our domestic refineries must be made to work. Appropriate incentives need to be worked out to attract new investment in refining. While domestic refining by itself is not sufficient to guarantee product price stability, there are clear gains to be derived from domestic refining as opposed to imports.There are the overall gains in employment and general economic activity. There are also the obvious savings in freight and insurance costs. In addition to these, domestic supply of products will relieve the destabilizing pressure of import dependence on the exchange rate.It is worth emphasizing that a reform policy based on importation of refined products is inherently destabilizing for the domestic economy. Importation necessarily puts pressure on the exchange rate of the naira. Since the exchange rate is one of the two major determinants of the domestic price of petroleum products in an import based reform regime, a destabilizing mechanism becomes automatically a feature of the system.Continuing, NLC said, As long as the domestic prices of products continue to be tied to the international price of crude, the crisis will remain.It is in recognition of this that we propose a re-introduction of a modified policy of guaranteed crude price for domestic consumption. Rather than returning to the fixed guaranteed price as earlier operated, we propose a price band within which the price of crude for domestic consumption can fluctuate.In this regard, we agree with the spirit of the proposal put forward in the Senate Committee on Employment, Labour and Productivity report to the Senate on the 7th of October 2004. This proposal involves setting a price modulating band for crude to be processed in Nigeria for domestic consumption.As for the specific band, we propose the cost of extraction and delivery to the gates of refineries X as the floor and X+Y as the ceiling, where y is the target inflation rate set by government policy in the current year. The adoption of this mechanism will ensure a stable price regime that will allow economic actors make plans.It should be emphasized that the guaranteed price should not be on offer to only NNPC, but to all refiners and to the limit of the crude actually refined for domestic consumption.Given that in the short run, there are no domestic refiners, tenders should be opened for the domestic crude for potential refiners to bid with clear timelines on domestic refining. In the short term, which should not exceed two years, bid winners will be allowed to arrange off-shore contract refining.NLC added that the downstream sector as presently constituted is characterised by industry dominance by NNPC and general monopolistic tendencies. Recommendations need to be made on how to open up the sector to competition. We need to design strategies for opening up monopoly assets and infrastructure (such as import receptacles, storage depots and pipelines) to competitors, who must of course pay economic fees.It needs to be recognised and emphasized that the implicit subsidy implied by the guaranteed crude price scheme need not undermine competition and deregulation. Examples abound the world over where subsidies continue to be provided in deregulated and competitive environments. The agricultural sectors of the economies of the United States and other Organization for Economic Cooperation and Development, OECD, countries are competitive and deregulated.Yet, agricultural subsidies continue to be provided daily. In like manner, a number of drug subsidy schemes exist in various countries of the world. Yet, the pharmaceutical industry remains deregulated and competitive.

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K.M, (2003), Modes of Deregulation in the Downstream Sector of the Nigerian Petroleum Industry, Certified National Accountant, July September.

Fadare S., (2009), Big Corruption in the Petroleum Industry is a Challenge to Deregulation, Sunday Champion, November 22, Vol.22,No.043.

Fawibe D., (2009), The Need for Complete Deregulation in the Nigerian Petroleum Industry, International Energy Services Limited Lagos, October 21. Federal Republic of Nigeria, (2000), Overview of Petroleum Products Supply, Report of the Special Committee on the Review of Petroleum Products, Supply and Distributions, Abuja: Integrated Press Ltd. Gidado, M.M., (1999), Petroleum Development Contracts with Multinational Oil Firms: The Nigerian Experience, Nigeria: Ed-Linform Services. Hornby, A.S., (2001), Oxford Advanced Learners Dictionary, New York: Oxford University Press. Hornby, A.S., (2005), Oxford Advanced Learners Dictionary, New York: Oxford University Press, International Students Edition. Movement for Economic Emancipation, (2010), Save our Soul on the Huge loss of Fuel Subsidy, The Nation, Monday, March 11, Vol.5, No.1319. Nigerian Oil Industry, (1993), The Role of Oil in Nigerian Economy, Nigeira: John West Publications Limited. Obioma G., (2000), Downstream: FG Articulates Policy on Pricing Agency, Daily Champion, August 14. Okere R., (2010), Stakeholders Set Agenda for Allision-Madueke, Petroleum Minister, The Guardian, Wednesday, April 7, Vol.27,No.11,424. Oketola D., (2010), Marketer Will Not Take Advantage of Deregulation to Hike Fuel Prices, The Punch, Thursday, January 7, Vol.17, No. 20558. Okiti O., (2009), Economic Notes From Summit, BusinessDay, Monday, December 21, Vol. 8, No.118. Okpole D., (2010), New Refineries: NNPC, China Sign 4.144 tr. MOU, Nigerian Compass,Friday, May 14, Vol.2, No.718. Olayinka C. and Lawal, (2009), Protests Loom Over Oil Deregulation, The Guardian,Tuesday, October 13, Vol. 27, No.11248. Deregulation of Downstream Oil Sector in Nigeria: Its Prospect Ovaga, Okey H.129 Olayinka C., (2010), NNPC Insists on Deregulation of Oil Sector, The Guardian, Tuesday, March 30, Vol. 27, No.11, 416. Omotosho G., (2010), A Voice of Sense for Nigeria, The Nation. Thursday, March 18 Vol.5, No.1336. Onyekwere J., (2009), The Intractable Monster The Week, November 30, Vol. 30, No. 13. Journal of Social Science and Public Policy Volume 2, December 2010

CHAPTER THREE3.1RESEARCH DESIGNINTRODUCTION TO THE CHAPTERThis chapter examines the procedure and technique used in the course of this investigation in order to find out the deregulation of down stream sector of Nigeria oil industry, prospect, problem and challenges. To this effect this chapter is divided into sub-sectioned under the following headings:a. Area of study.b. Population of study.c. Sample and sampling technique.d. Instrument of data collection.e. Procedure.f. Method of data analysis.

3.2AREA OF STUDYThis research was carried out in NNPC in Lagos State.

3.3POPULATION OF STUDYThe population of this study comprised of all knowledges people on down stream and customers in Lagos State.

3.4SAMPLE AND SAMPLING TECHNIQUESimple random technique was employed to select pupil from the primary school selected. A total of hundred were randomly selected for the research and questionnaire distributed.3.5INSTRUMENT The main instrument employed in this research work for data collection was questionnaire. This was designed separately for the teacher and students. The instrument is of two sections. Section A part of the questionnaire contains personal information about the respondent while section B was made up question relating to the study of effect of instructional material on the academic performance of secondary students. Responses to the statement on the questionnaire were graded based on a two (2) point scale that is, Yes and NO. The outcome of the data collected is analyzed.

3.6PROCEDUREThe researcher visited NNPC and administered the questionnaires. Hundred copies were produced and administered to the petroleum product users and NNPC staffs respectively. Permission was sought from the users of petroleum products before the questionnaire was administered on the respondents. It was ensured that the respondent completed the questionnaire immediately and submitted back to the researcher. This guaranteed that the personal views of the respondents on the topic were expressed. The responses were collated for necessary analysis and interpretation.The data analysis that was employed for the research work was simple percentage; the data was analyzed at this level. At this level, the analysis was on the percentage of respondent that either agree or disagree from the questionnaire. Thus the number and scores of these respondents were calculated and interpreted.Also, the number of responses that strongly disagree was calculated and interpreted. The percentages got by dividing the number of respondent by the total number of responses and multiply by 100. For instance, X represent the total respondent and Y represent the total item employed, then the total percentage of respondents, and was calculated as: Y X 100 X1

REFERENCESAsika .N. (2008). Research Methodology in the Behavioural Sciences (Lagos), Longman publication. Nigeria).

Fagbolungbe. O.B. (2009). Research Method for Tertiary institution Lagos. Kole Consults Publication. Pg. 2-23

Shokan. O.O. (2003). Research Methodology and Seminar for all Discipline Nigerian: Lagos, Shokan investment Company Ltd. Nigeria Pg. 12-24

CHAPTER FOURDATA PRESENTATION AND ANALYSIS

4.0INTRODUCTIONThis chapter will give detail of how the data collected were analysed and examined according to research questions, hypotheses, and discussion of results. The analysis centers on the research instrument, which is structured to reflect the purpose and objectives of this study using the Statistical Package for Social Sciences (SPSS).All necessary data table were analyzed in relation to the respondent from the questionnaire.The hypotheses were tested and the result of the analysis provides the basic for findings, conclusion, and recommendations.

4.1 ANALYSIS OF RESPONDENTS QUESTIONNAIREOut of the hundred (100) questionnaires distributed to the respondents, Eighty (80) were effectively filled and returned which represent eighty percent (80%) of the total respondents.

4.2ANALYSIS OF INDIVIDUAL STATEMENTGET FILE='C:\Users\d\Desktop\back-up\Documents\Documents\mary corrected.sav'.DATASET NAME DataSet1 WINDOW=FRONT.GET FILE='C:\Users\d\Desktop\back-up\Documents\Documents\mary corrected.sav'.

Warning # 67. Command name: GET FILEThe document is already in use by another user or process. If you makechanges to the document they may overwrite changes made by others or yourchanges may be overwritten by others.File opened C:\Users\d\Desktop\back-up\Documents\Documents\mary corrected.savDATASET NAME DataSet2 WINDOW=FRONT.FREQUENCIES VARIABLES=q1 q2 q3 q4 q5 q6 q7 q8 q9 q10 q11 q12 q13 q14 q15 q16 q17 q18 q19 q20 /ORDER=ANALYSIS.

FrequenciesNotes

Output Created19-Oct-2012 08:36:10

Comments

InputDataC:\Users\d\Desktop\back-up\Documents\Documents\mary corrected.sav

Active DatasetDataSet2

Filter

Weight

Split File

N of Rows in Working Data File80

Missing Value HandlingDefinition of MissingUser-defined missing values are treated as missing.

Cases UsedStatistics are based on all cases with valid data.

SyntaxFREQUENCIES VARIABLES=q1 q2 q3 q4 q5 q6 q7 q8 q9 q10 q11 q12 q13 q14 q15

/ORDER=ANALYSIS.

ResourcesProcessor Time00 00:00:00.047

Elapsed Time00 00:00:00.157

[DataSet2]

Statistics

SexMarital StatusAgeOccupational StatusHighest level of education

NValid8080808080

Missing00000

Statistics

Do you agree that deregulation is the withdrawal of government control of resource allocationDo you agree that deregulation is allowing the forces of demand and supply in determining price of goods and servicesDo you agree that deregulation of the downstream oil sectors will improve the industryDo you agree that private individuals will manage the downstream oil sectors comfortably, efficiently and profitabilityDo you agree that deregulation of the downstream oil sectors will increase the transportation cost

NValid8080808080

Missing00000

Statistics

Do you agree that deregulation in the oil industry will reduce or eradicate total dependence on importation of petroleum productsDo you agree that deregulation of the downstream oil sector has impacted on petroleum products pricing in NigeriaDo you agree that regulated downstream sector differs from the deregulated eraDo you agree that deregulation of the downstream oil sector will eventually lead to a story if strictly adhered toDo you agree that deregulation of the downstream oil sector will eradicate monopoly

NValid8080808080

Missing00000

Frequency TableGender

FrequencyPercentValid PercentCumulative Percent

ValidMale4556.2556.2556.25

Female3543.7543.75100.0

Total80100.0100.0

Marital Status

FrequencyPercentValid PercentCumulative Percent

ValidSingle28353535

Married44555590

Divorced33.753.7593.75

Widow56.256.25100.0

Total80100.0100.0

Age

FrequencyPercentValid PercentCumulative Percent

Valid16-252025.025.037.5

26-352733.7533.7558.75

36-4546 and above231028.7512.528.7512.587.5100.0

Total80100.0100.0

Highest Level of Education

FrequencyPercentValid PercentCumulative Percent

ValidPrimary school1012.512.512.5

Secondary schoolHigher schoolO.N.D2751533.756.2518.7533.756.2518.7545.2551.5071.25

HNDPost degreeOthers135516.256.256.2516.256.256.2587.5093.75100

Total80100.0100.0

Do you agree that deregulation is the withdrawal of government control of resource allocation?

FrequencyPercentValid PercentCumulative Percent

ValidYes4657.557.557.5

No3442.542.5100.0

Total80100.0100.0

Do you agree that deregulation is allowing the forces of demand and supply in determining price of goods and services?

FrequencyPercentValid PercentCumulative Percent

ValidYes4961.2561.2561.25

No3138.7538.75100.0

Total80100.0100.0

Do you agree that deregulation of the downstream oil sectors will improve the industry?

FrequencyPercentValid PercentCumulative Percent

ValidYes4050.050.050.0

No4050.050.0100.0

Total80100.0100.0

Do you agree that private individuals will manage the downstream oil sectors comfortably, efficiently and profitability?

FrequencyPercentValid PercentCumulative Percent

ValidYes5265.065.065.0

No2835.035.0100.0

Total80100.0100.0

Do you agree that deregulation of the downstream oil sectors will increase the transportation cost?

FrequencyPercentValid PercentCumulative Percent

ValidYes5670.070.070.0

No2430.030.0100.0

Total80100.0100.0

Do you agree that deregulation in the oil industry will reduce or eradicate total dependence on importation of petroleum products?

FrequencyPercentValid PercentCumulative Percent

ValidYes4556.2556.2556.25

No3544.7544.75100.0

Total80100.0100.0

Do you agree that deregulation of the downstream oil sector has impacted on petroleum products pricing in Nigeria?

FrequencyPercentValid PercentCumulative Percent

ValidYes4961.2561.2561.25

No3138.7538.75100.0

Total80100.0100.0

Do you agree that regulated downstream sector differs from the deregulated era?

FrequencyPercentValid PercentCumulative Percent

ValidYes7087.587.587.5

No1012.512.5100.0

Total80100.0100.0

Do you agree that deregulation of the downstream oil sector will eventually lead to a story if strictly adhered to?

FrequencyPercentValid PercentCumulative Percent

ValidYes4252.552.552.5

No3847.547.5100.0

Total80100.0100.0

Do you agree that deregulation of the downstream oil sector will eradicate monopoly?

FrequencyPercentValid PercentCumulative Percent

ValidYes80100.0100.0100.0

Agree00.00.0100.0

Total80100.0100.0

TESTING OF HYPOTHESISAll the hypotheses formulated in the chapter one of this study will be tested upon, by the use of Chi-square statistical method. The formula for Chi-square is given as:X2 = (Fo Fe) FeWhereX2 = Chi-square =SummationFo = Observed frequencyFe = Expected frequencyTo obtain the table value of Chi-square (x2t), degree of freedom will be used at 0.05 level of significance. This is given as df=(R-1)(C-1), where c is the number of column while r is the number of row.Decision will be made based on finding, that is, if the calculated value of Chi-square (x2) is greater than table value, then the alternative hypothesis (H1) will be accepted while the null hypothesis (Ho) will be rejected.But if otherwise, the null hypothesis (Ho) will be