Deregulation and Commercialisation of the Downstream Oil Sector in Nigeria - 3

LEGAL AND REGULATORY FRAMEWORK

A pre-requisite for transition from a regulated to deregulated economy is an appropriate legal and regulatory framework. A deregulated economy does not imply the absence of regulation. The regulatory  and  supervisory  bodies  exist  to  oversee various  aspects  of  the  implementation  of  the  policy  in  the  downstream sector,  pricing,  supply  and  distribution,  adherence  to  standards,  health safety  and  environment,  consumer  protection,  planning  and  research  and other  areas  that  require  monitoring. However,  it  is  the  business environment  that  dictates  and  determines  the  nature  and  extent  of involvement of regulator or supervisory bodies.

Legal Framework Issues on Deregulation and Commercialisation of the Downstream Oil Sector in Nigeria - III

The regulatory framework established for the deregulation of the downstream  oil  sector  is  the  Petroleum  Products Pricing  Agency  (Establishment)  Act,  2003,  primarily  to  determine  the pricing  policy  of  petroleum  products  and  regulate  their  supply  and distribution. The functions of the Agency are to:

  • determine the pricing policy of petroleum products;
  • regulate the supply and distribution of petroleum products;
  • moderate volatility  in  petroleum  products  prices,  while ensuring reasonable returns to operators;
  • maintain constant surveillance over all key indices relevant to pricing  policy  and  periodically  approve  benchmark  prices  for all products;
  • establish an information and data bank through liaison with all relevant  agencies  to  facilitate  the  making  of  informal  and realistic decisions and pricing polices;
  • identify macro-economic  factors  with  relationship  to  prices  of petroleum products and advise Government on all appropriate strategies for dealing with them;
  • oversee the implementation of the  white paper on the Report of  the  Special  Committee  on  the  Review of  Petroleum Products  Supply  and  Distribution  as  they  relate  to  its functions,  taking  cognisance  of  the  phasing  of  the  specific proposals;
  • establish parameters and codes of conduct for all  operators in the downstream sector of the petroleum industry;
  • Establish firm  linkages  with  key  segments  of the  society  and ensure  that  its  key  decisions  enjoy  the  widest  possible understanding and support.

In analysing the legal framework that has been  put in place to effect the  deregulation  policy  in  the  downstream  petroleum  sector, it is sad that apart from the Act establishing the PPPRA, which is the regulatory agency, there is no solid legal framework.


Nigeria is not the only country to deregulate its downstream oil sector. Other countries have  done so.  The experiences of these countries are analysed in this sub-section with the view of drawing from their experience. These countries include Ghana, which is not an oil producing country and so it has to import its petroleum products. The NPTB is in charge of importation, refining, distribution and sale of all petroleum products. The cost of deregulation is the potential of increases from transport to food, to cement, to rent, and so on. The Ghanaian government has already initiated measures to mitigate the effects of the price increases. South  Africa also,  with four functioning  (stress  on the  “functioning”) refineries and a fifth Gas to Liquid(GTL) Refinery has a total refining capacity of approximately 650,000 bpd, sufficient to meet current demand. The country has the second largest refining capacity in Africa after Egypt. The intention of the Government is to introduce a deregulated oil industry as pre-determined milestones are achieved.  Knowing  that  the  transition  process may  be  difficult  and  that  there  may  be  some  negative  effects  on employment and small businesses in the short and medium term. In view  of  these,  the  government  proposes  a  phased  and  managed reform  process  which  will  allow  for  proper  management  and monitoring. It will allow time for preparation and adjustment by the respective industry participants and role-players.  Currently the country is into export of petroleum products to Southern Africa and the Indian/ Atlantic Basin Markets. The deregulation is designed to be in three sequential phases. The  first  phase  will  allow  for  interim  adjustments  to  fuel  price mechanisms and settling of over/under recovery account with the oil industry.  In  this  phase,  mechanisms  will  be  put  into  place  to ameliorate  any  negative  impact on  employment  opportunities  as  a result of restructuring process. The key milestones to be achieved in this  phase  include:  the  sustainable  presence,  ownership  or  control by  historically  disadvantaged  South  Africans  of  approximately  a quarter  of  all  facets  of  the  liquid  fuel  industry,  or  plans  to  achieve this;  the  introduction  of  necessary  legislation  to  give  effect  to  the cornerstones  of  government  policy  including  the  protection  of  “full service” and equitable participation of small business in the industry; the introduction of any necessary institution and regulatory capacity required to enable government to adequately monitor possible post deregulation distortions and to enable it act against such distortions; suitable arrangements to address any labour related consequences of the deregulation. The second phase is characterized by allowing market forces set prices.  Retail price regulation, import control and government support for the service station rationalization plan will be simultaneously removed. The third phase will be the post deregulation transition phase. This  will  be  characterized  by  government  vigilance  and  monitoring for  possible  problems  arising  from  the  introduction  of  deregulation and  corrective  actions  to  address  them.  In  the  event  of  uneven competition  resulting  in  price  distortions,  for  example  rural  –urban cross-subsidies, fiscal measures or price capping may be employed too  counter  balance such  distortions. Government  will  monitor  and evaluate  possible  problems  arising  from  the  introduction  of deregulation  and  will  be  taking  corrective  actions  on  the  different phases as they unfold.

In Philippines, deregulation of the Philippine petroleum downstream industry was achieved in 1998.  It was done in two phases namely; partial and full deregulation.  In the partial deregulation phase, oil importation was liberalized and the automatic pricing mechanism was implemented. While in the full deregulation phase, controls on oil price setting were lifted. Mali also had her share in the deregulation subject at a point in her history.

Post-Deregulation Era

The importance of the oil industry generally and the downstream sector in particular to Nigerians can never be over emphasised. For a sector that contributes over ninety per cent of the nation’s earnings, it is easy to understand that developments in that sector will have ripple effects on the whole economy, the oil industry, and will impact significantly on the lives of the citizens. The deregulation policy is an on going, germane topic in   the country. A series of events have taken place since the implementation of the  policy;  many  more  are  sure  to  take  place.  These  events  include  the establishment  of  the  regulatory  body  PPPRA,  the  establishment  of  the Petroleum  Support  Fund,  the  selling  of  two  refineries  and  Government’s shares in African Petroleum, the incessant  rising of fuel price followed by the  presence  of  long  fuel  queues,  strikes  by  Organised  Labour  and  the increase in the prices of transportation, housing, food, necessaries of life. These events are embodied in the effects of the deregulation policy.
The effects of the policy can be classified into five; the entrance of private operators,  privatisation  of  government  shares  and  infrastructure,  the establishment  of  PPPRA  and  PSF,  removal  of  fuel  subsidy,  lastly  socioeconomic.
-  Entrance  of  Private  Operators:  Prior  to  the  deregulation  of  the downstream oil industry, the government through the NNPC played a leading role in the oil industry. The Nigerian National Petroleum Corporation had monopoly of petroleum product supply; it was the only wholesale supplier of petroleum product, both through refining and imports.  Following  the  announcement  of  the  deregulation  of the  downstream  petroleum  sector,  private  investors/  operators embarked  on  massive  investment  in  the  sector  culminating  in building and commissioning of jetties, depots and service stations with  new  pumps  development,  expansion  of  trucking  fleet, modernisation  of  Health  and  Safety  Environment  equipment.
Apapa  jetty  which  was  hitherto  exclusively  used  by  NNPC  was opened for use by other players on a user fee basis. Independent  Marketers  together  with  their  foreign  partners, Pure  bond  of  London  have  floated  the  Nigerian  Independent Company (NIPCO) to build a 3.65 billion-naira  depot in Lagos. The depot has a 40 million litres capacity for PMS, AGO and DPK. The Depot and Petroleum Products Marketers Association are not left out either (DAPPMA). DAPPMA has made substantial investment in the area of storage facilities and products haulage.
In  the  construction  of  private  refineries,  eighteen  companies have been awarded licence to build refineries. Badagry Petroleum Refinery  Limited  is  one of the  private  operators  awarded to  build petroleum  refineries.  The  company  partner  with  TRICAN Corporation United States of American to carry out the project. Mr. Babajide  Soyode  the  Technical  Adviser  Badagry  Refinery  in  an interview  on  a  daily  newspaper  stated  that  the  joint  venture agreement  became  expedient  to  adequately  implement  the deregulation  policy.  Under  the  agreement,  TRICAN  Corporation becomes the majority equity holder of 58%, while BPPLY holds the balance of 42%. Furthermore,  NNPC’s  monopoly  of  product  supply  is  being broken  through  direct  importation,  storage  and  distribution  of petroleum product by private investors.
-  Privatization of Government’s Shares and Infrastructure:
The  past  administration  in  its  implementation  of  the deregulation  policy  sold  NNPC’s  shares  in  AFRICAN PETROLEUM.  It  also  sold  both  the  Kaduna  and  Port  Harcourt refineries.
One of the effects of the deregulation policy is the establishment of  the  PPPRA.  The  PPPRA,  in  a  nutshell,  is  the  regulatory  body established  to  superintend  the  various  phases  of  the  proposal embodied in the report submitted by the SCRPPSD, especially the deregulation  and  liberalization  of  the  downstream  sector  of  the petroleum  industry;  to  determine  the  pricing  policy  of  petroleum products and regulate their supply and distribution.
The  PETROLEUM  SUPPORT  FUND  came  about  as  a modulator mechanism that was recommended by the “Independent Coordinating  Committee  On  Measures  for  Cushioning  the  Effects of  the  Increase  in  The  Prices  of  Petroleum  Products”.  The Committee  recommended  the  establishment  of  a  modulator mechanism to stabilize domestic prices of petroleum products and mitigate the impact of fluctuations in crude prices on the domestic products  market.  To  that  effect,  the  Government  established  the Petroleum Support Fund. The PSF is a pool of funds budgeted for by  Government  to  stabilize  the  domestic  prices  of  petroleum products  against  the  volatility  in  international  crude  and  products prices.

REMOVAL OF FUEL SUBSIDY:
The  major  contentious  issue  in  the  deregulation  of  the downstream  sector  is  the  price.  The  government,  in  an  effort  at solving  the  problem  of  pricing  of  petroleum  products  employed several  options  and  the  issue  of  subsidy  became  a  major  one. Subsidy  remains  today  the  most  unpopular  weapon  government employs anytime it decides on effecting an increase in the price of oil.  It  remains  the  only  word  government  resorts  to  when questioned  on  the  rationale  behind  any  such  increase  and  the frequency of the excuse of the need to remove subsidy has made the word unattractive to Nigerians. Former President,  Chief  Olusegun  Obasanjo, told Nigerians that the removal of  subsidy on petrol was the key to the policy of deregulation, but today it has proved to be  its  albatross  and  that  is  why  it  is  difficult  to  get  people  into refining  business  in  Nigeria.  That  has  also  accounted  for  why  17 (seventeen) companies licensed to  build and operate refineries in the  country  five  years  ago  have  not  advanced  much  as  it  was envisaged in the beginning. The licenses stated that they could not understand  why  the  government  should  sell  Nigerian  crude  to Nigerian companies operating in the  country at international price, more so when it knows that it will be morally wrong for government to ask Nigerians to pay international price for the refined petroleum products  when  they  know  that  the  crude  these  companies  are using in making the fuel available is gotten from their backyard.
The  government’s  method  of  implementing  the  deregulation policy  of  the  downstream  sector  led to  periodic  and constant increase in the price of petroleum products for the local market and exploitive tendencies of the oil marketers. September  2005  in  Nigeria  witnessed  an unprecedented  wave  of  protests  in   form  of  mass demonstrations and rallies that were held in at least ten major state capitals across the  country. The demonstrators rejected all forms of increment in prices of petroleum products.  The increment was over 30 per cent.  This was the tenth increase in the price of petroleum products since the inception of the administration of General Olusegun Obasanjo. With two days to the end of his eight-year rule as elected president of Nigeria, General Olusegun Obasanjo, on Sunday, May 27, 2007, effected another increase in the prices of petroleum products with petrol from N6500 to N75.00 and kerosene from N54.00 to N64.00. The price of  diesel  which  was  said  to  have  been  deregulated  was  not affected. In eight years, Obasanjo upped the price of petrol eight times  –  from  N20.00  to  N75  –  representing  a  275  per  cent increase.  For diesel and kerosene,  the  margins  are  even  wider. The devastating effects of previous increases had in no way been ameliorated when another price hike was imposed. The  price  hike  led  to  another  strike  by  Organised  Labour  for price  reversal.  This made President Umar Yar’Adua to reduce the price to N70.00.
The multiplier effect of these increments has been enormous on the Nigerian populace. Directly, it has meant sharp increase in the cost of household energy procurement, since most households rely on  kerosene  and  other  petroleum  products  for  domestic  fuel  to cook food and so on. The recurrent increase has meant that more of the already inadequate income of workers is now going towards household energy procurement. For those who cannot cope, it has meant going back to wholesale firewood cooking with its numerous health and environment hazards. For  industries,  it led  to  an  enormous increase in the cost of industrial energy procurement and hence a rise  in  the  cost  of  production.  This  is  more  the  case  since  the electricity  supply  remains  predictably  epileptic  and  most  of  the factories  and  other  industries  have  no  choice  but  rely  on  diesel generators to propel their productions. This added cost has led to a major  crisis  on  the  industrial  plane  with  the  untoward  effect  of workforce  load  shedding  (mass  retrenchment)  and  in  some circumstances,  leading  to  the  outright  closure  of  factories  and other  workplaces  that  depend  heavily  on  diesel  running generators. In the same ration, leading to the escalation of violent crimes, fraud, prostitution, the list is inexhaustible.
The  transport  sector  is  obviously  the  worst  hit  among  the sectors  under  review.  Increment in prices of petroleum products has led to a direct increase in the cost of transportation of commuters and goods.  The increase in the price of petroleum products comes with the attendant increase in the price of everything; from the price of rent to the price of the supposed not so important things in the market, for example toiletries.


Deregulation as a policy has wonderful benefits if well implemented. As has been witnessed,  the  deregulation  policy in Nigeria did  not  scratch  the  surface  in  solving  the  problem  it  was introduced  to  solve.  The  following  in  this  writer’s  view  are  what  the government  should  have  implemented,  the  alternative  remedy  to  the deregulation policy.
a)  Developing the agricultural sector: long before the discovery of  crude  oil  in  Nigeria  and  by  the  time  Nigeria  became politically independent, agriculture was the dominant  sector of the economy, contributing about 70 per cent of the gross domestic  product  (GDP),  employing  and  accounting  for about  90  per  cent  of  foreign  earning  and  Federal Government  revenue.  After  the  discovery  of  oil  in commercial  quantities  in1956,  crude  oil  became  the dominant resource in mid 1970’s. The oil boom of the 1970’s led  Nigeria  to  neglect  its  strong  agricultural  and  light manufacturing  base  in  favour  of  an  unhealthy  dependence on  crude  oil.  The  largely  backward  agricultural  sector  has been  unable  to  keep  up  with  rapid  population  growth,  and Nigeria  once  a  large  exporter  of  food,  must  now  import food.
The Nigerian government needed to have developed the agricultural sector of the  country.  In so doing  it  would have reduced the level of unemployment in the country and shifted the  country’s  dependence  from  crude  oil.  In  this  way,  the usual  reliance  on  petroleum  will  no  longer  be  in  existence. Secondly,  the  additional  revenue  the  government  gave  as reason  for  the  deregulation  of  the  price  of  fuel-  that  is  the removal  of  subsidy-  would  have  been  gotten  from  the improved agricultural sector.
One of the factors that make a country to have a strong economic base is the fact that the country produces enough food to feed its population. America is a strong country due to the fact that it has a strong agricultural sector. It produces more than 90 per cent of the food its population feeds on and has more than enough to export.
b)  Seeking  other  energy  avenues:  Jimmy  Carter,  a  one-time President of the United States  of  America, when the country was going through fuel shortages, long fuel queues, increase in  the  price  of  gasoline,  stated  that  one  of  the  ways  the country was going to get out of that situation, was to commit funds  and  resources  to  the  development  of  alternative sources  of  fuel.  In  this  way,  the  country’s  dependence  on petroleum  will  be  reduced.
In  keeping  to  this,  the  George Bush  administration  presently,  proposed  a  budget  to increase funding for research into clean coal, ethanol -which is a bio fuel, and renewable energy. President George Bush had  announced  the  Advanced  Energy  Initiative  which involves developing alternative fuels and clean energy in an effort  to  replace  more  than  75  per  cent  of  the  country’s  oil imports from the  Middle  East  by  2025.  The  plan  includes  a new solar energy initiative, wind energy research, increase in funding  to  speed  up  development  of  cars  that  run  on hydrogen and electricity.
Dependence on petroleum is no longer encouraged.  The  most  appropriate  thing  is  to  seek and develop  alternatives  to  crude  oil.  This will reduce the country’s reliance on petroleum as a source of energy. The problem  of  fuel  scarcity  will  no  longer  exist  because; petroleum  products  will  no  longer  take  centre  stage  as energy  provider  for  the  populace.  Also  diversification  from the  oil  and  gas  sector  would  put  an  end  to  the  cases  of restiveness  and  other  social  vices  among  the  youth  in  the Niger Delta.
c)  Development  of  a  working  Transport  System:  one  of  the things  the  government  should  have  done  rather  than  the deregulation  policy  is  the  development  of  the  Nigerian transport system.  This is one of the ways of reducing the consumption of fuel by individuals. If the country could boast of a good railway and effective bus system, the need to own cars would have been dispensed with by most people. The need to fuel more cars would then, not arise.  More people will make use of both the railway and bus system to get to their destinations.  In developed countries, these are the measures that  have  been taken to  reduce  the consumption of fuel by the populace. People who own cars usually, would, park them in the car parks so as to benefit from the railway and bus system. This helps them to save more and reduce their consumption of petrol.
d)  Building More Refineries: If we ask of  what  use  is  it  to  build  more  refineries  when  the  present ones are not  being  utilized, the population of the country has increased from what it used to be after the last refinery was built in 1989. The  government  needed  to  have  rejuvenated  the existing  refineries  and  provided  new  ones.  It  can  rightly  be argued that the building of refineries is one of the benefits of the deregulation policy, but as is clearly seen, licences have been given for the building of refineries by private operators but till date non has been built and so the country continues to  rely  heavily  on  the  importation  of  refined  petroleum products rather than producing her own. A lasting solution to the  problems  of  supply  of  petroleum  products  lies  in  the repairs of the present refineries, building of more refineries to at  least  double  the  combined  capacity  of  the  present  four refineries.

Government exists to formulate and implement public policies to enhance the living standard of the people; and deregulation of any aspect of the economy is one of such public policies that government can adopt. Public policy is the formal or stated decisions of government bodies or a plan of action adopted by government or its agents.  It involves the use of state coercion agencies to enforce and  ensure compliance.

Deregulation of  any  aspect  of  a  nation's economy on the other hand could take the form of privatisation or divestiture  of an  aspect  of the  economy  from  government  to private investors. The purpose of deregulation is to ensure competitive economic system devoid of monopoly and allow price mechanism of demand and supply's principle of economy to prevail.” Deregulation is also a tool for reducing government intervention in economic activities and providing relevant structure of incentives that would put the economy on the path of recovery and growth. Other scholars see deregulation as a process where  government reduces its role and  allows  the  natural  market  forces  of demand  and  supply  to become fully operational. Its effect according to them is freedom in the market place and the best route to an efficient and growing economy.  As such, deregulation could be said to be government withdrawal of control from the working of an aspect of the economy and leaving same in the hands of the private sector operators for more efficient use of resources and to bring about development in the society. The  main  objectives  of deregulation  of any  aspect  o f a  nation's economy  include:  introduction  of  market  economy,  increasing democracy  and  guaranteeing  political  freedom,  and  increasing government revenue.


In importance, the deregulation of an aspect of the economy o f a country returns that when market  forces  are  allowed  to  play  out,  and  the  private businesses  are  given  pre-eminence  in  the  economy,  then  the economy would  be  rejuvenated  and  sustainable  development would  consequently  ensue.”  Proper management of revenue generated from the deregulation of an aspect of the economy could go a long way in the provision of social amenities, infrastructural development  and  job  creation  for  the  populace.  When this happens, it can be concluded that development has materialised in that society.
 

The concept of development itself has generated different meanings amongst scholars.  It  is  a multidimensional  process  involving  the  re-organisation and re­orientation of the  entire  economic  and  social  system,  which involves the improvement of income and output, radical changes in institutional, social and administrative structures as well as in popular attitudes, customs and beliefs. It is a continuous process of positive change in the quality of life o f a person or group of persons by the reason of access to better living condition.  They  went  further  to  identify indicators  of development  as:  ability to  feed,  clothe and shelter oneself resulting from more income in one's occupation or means of livelihood; ability to live a much longer life as  a result of the provision of  health  and  medical  facilities,  and  prevention  o f diseases through  better  sanitation;  ability  to  read,  write  and understand  forces  surrounding  one  through  the  provision  of formal and  informal  education;  and  ability  to  participate meaningfully  in  political  activities  and  in  the  policy  making process at the local and governmental levels.

Development is a progressive realization of the fullest possible and balanced flourishing of both human and natural resources - the latter in view of the former. It  is also  a  continuous  improvement  in  the capacity of the individual and society to control and  manipulate the forces of nature for the enhancement of the living standard of the  people  in  a  society.  On  the  other hand, development can be viewed in terms of improving the living conditions of people  amongst  the  world's  poorest  nations because it entails a higher quality of life, higher income, better education, higher standards of health and nutrition, less poverty in society, a cleaner environment, more equal opportunities, greater individual  freedom  and  richer  cultural  life  amongst  citizens  of poorer nations. Development also refers to advancement through progressive changes in economic, social, cultural, technological and political conditions of a society leading to an improvement in the welfare of citizens.  Scholars have argued that no society can claim to be developed if there is a high level of poverty, insecurity, unemployment, illiteracy, malnutrition, child mortality, political instability, deplorable state  of infrastructure and inequality in income distribution.


For development to have taken place in a society; there must be an enhancement of the quality of life of citizens: meeting the basic needs of food, shelter, good health, good education and a general sense of well­being amongst the people.  Development therefore is a process that entails growth both in infrastructure and in the lives of the people.  Development can be stagnated where there is lack of long-term perspective on the part of leadership in a country. From the foregoing, development is  associated with better quality of living  in  terms  of  the  availability  and  access  to  the  basic necessities of life  such  as  clean  water,  food,  clothing, shelter, good  education,  health  and  the  ability  to  participate  in  the decision  making  process of government  in  a  society.  These indicators of development as pointed out above require funds on the part of the government. Hence all things being equal the more funds available to government, the more likely the provision of these amenities.


DEREGULATION OF THE PETROLEUM SECTOR AND DEVELOPMENT IN NIGERIA
Nigeria currently has five refineries located in Port-Harcourt, Warri and Kaduna, of which four plants are government owned and managed by the state owned company  - Nigerian National Petroleum Corporation (NNPC), while the  fifth plant is owned and operated by the Niger Delta Petroleum Resources (NDPR). The total  output  production  of petroleum  products  from  these  five refineries  combined  barely  met  30  percent  needs  of domestic consumption.  These five refineries are  currently  working  at below 55 percent installed capacity due to mismanagement, lack of maintenance culture  and corrupt practices  on  the part of the operators. As a result, the Federal Government had to resort to fuel  importation to  meet domestic  needs.  This  development resulted in the emergence o f “rich oil Mafia” that controls the Nigerian petroleum sector and hoards petroleum products with a view to  increasing  the  pump  price  o f petrol  arbitrarily  without considering  the  interest  of  the  citizens. The dangers o f over reliance on oil and gas as major sources of revenue and resorting to  fuel  importation as a means  of meeting the  domestic needs of petroleum products in Nigeria are close. Unless Nigeria  faces  the reality  of diversifying its economy from reliance on oil as a major revenue earner and develop capacity in other areas like agriculture, mining and  solid  minerals;  the  future  may  remain  bleak. Our four state owned refineries are not operating at full capacities and we take delight in exporting our crude oil  and again import back as refined  products  at high  costs..

There were certain principles and assumptions associated with the deregulation policy of  the  Federal  Government  in  the petroleum  sector.  These are:  that the  Nigerian  government recognises the  inadequacies  of  the  existing  state-owned  oil companies and desires to maximise supply sources for the refined products  market  in  the  country;  that  local  and  private  investors would  be  willing  to  takeover  the  state-owned  facilities  in their current state  of  dilapidation  and  operate  them  efficiently  and profitably thereafter;  that government monopoly o f refining and distribution  from  the  state-owned  storage  depot  would  be completely unbundled and abolished; that private refineries would procure  crude  oil  at  competitive  rates  and  sell  their  refined products profitably and at international prices both in and outside Nigeria as  desired  by  the  operator;  that  private  investors  would have open access to state-owned facilities like petroleum reception jetties  at  Escravos,  Atlas  Cove,  Okrika,  Effurun  and  Calabar, including the storage tanks at Port-Harcourt, Warri and Kaduna for expediting  the  logistics  o f  improving  petroleum  products availability  in  Nigeria;  that  prospective  private  operators  must have the necessary financial and technical capacities and be liable to  applicable  environmental,  community  relations  obligations, safety,  quality  and  other  standards,  and  that  unnecessary impediments,  including  over-bearing  procedures  for  granting licences  to  prospective  private  refiners  and  other  potential investors in the downstream sector that need to be removed may remain, given the nature of the bureaucracy in Nigeria.


The PPPRA evolved to establish  an  information  and  data  bank by  liaising  with  relevant  agencies;  facilitate  informed decisions  on  pricing  policies;  moderate  volatility  in  petroleum products pricing, while ensuring reasonable returns to operators; oversee  the  implementation of  relevant  recommendations  and programmes of the Federal Government; establish parameters and codes of conduct for all operators; maintain constant surveillance over all petroleum products; identify macro-economic factors in relation  to  pricing  of  petroleum  products  and  advise  the government  on  appropriate  strategies  for  dealing  with  them; establish linkages with key segments of the Nigerian society and ensuring  that  their  expectation  enjoy  the  widest  possible understanding  and  support;  prevent  conspiracy  and  restrictive trade practices that are harmful to the sector; and play a mediating role for all stakeholders in the sector. One of the major criticisms leveled against the PPPRA from the inception  is  its  method  of  implementing  the  liberalisation (deregulation) policy o f the Federal Government, which has to do with periodic and  constant  increases in the pump price of petrol and  other  petroleum  products.  This  has  further  encouraged  the exploitation  of  Nigerians  by  oil  marketers  in  the  country.

Consequently, due to the low minimum wage paid to workers in Nigeria at NGN 18,000 = $116.13 per month.; any increase in pump price o f petrol is easily felt by the people and automatically translates  into  price  increases  in  other  areas  such  as  costs  of transportation,  food,  shelter  and  other  basic  household  needs, hence the resistance from the people each time the price o f petrol goes up. The NGN 18,000 = $116.13 per month as salary is too small to enable people live quality life.
Justifying the deregulation policy of the Federal Government in  the  Nigerian  petroleum  sector,  arguments have surfaced that deregulation policy has the capacity to reform and reorientate the Nigerian public and private businesses to a better value system of transparency and accountability as a way of tackling effectively the menace of corruption.  In defending the announcement of the new petrol price regime that commenced on  1st' January, 2012 as the outcome of the total deregulation of the Nigerian petroleum sector  (from #65  to #141  per  litre)  by  the  PPPRA,  the Federal Government argued that the need for the deregulation of the petroleum sector  of the Nigerian  economy  has  become  so urgent  because  of  the  desire  for  economic  growth  and infrastructural  development. To achieve the development goals of the Federal Government, more revenue is required, yet so much is spent on fuel subsidy. For instance, while the amount paid on petrol importation by the government as subsidy was put at NGN1.5 trillion or USD9.68 billion in 2009, it rose to NGN 1.7 trillion or USD10.96 billion in 2011[10].  Furthermore,  while  recurrent expenditure has consistently increased since 1999 when Nigeria returned to democratic  governance,  capital  expenditure on the other  hand  has  continued  to  decrease.

The implication  is  that  if development  is  truly desired  in  the  country,  then  deregulation  of  the  Nigerian petroleum sector must be encouraged, implemented and an end put to the payment of subsidy on petroleum products. It was in a bid to overcome the problem of inefficiency in government  owned  business  ventures;  eliminate  fuel  subsidy and  corruption  in  the  public  sector  that  made  the  Federal Government to  redefine  its  role  in the economy. The government  has  now  limited  itself to  the  role  of creating  the enabling  environment  for private  sector  intervention  aimed  at facilitating sustainable growth and development in the country. This role is to be achieved through: the reduction in the duration and  cost  o f  registering  a  business;  simplification  and harmonization  of  the  tax  systems  and  payment  channels; reduction in the turnaround time and cost of obtaining building permits; ensuring easy access to affordable and long-term finance; expansion of Information  Technology  (IT)  infrastructure  to facilitate easy access to Internet and telecommunication services; encourage both local and foreign investors by improving ports and customs  management  (48-hours  clearance  o f goods  at  the  sea ports);  eliminating  immigration  bottlenecks  (simplify  visa issuance and work  permits);  improving  security  of  lives and property; complete  the  modernization  of  the  transportation system; and improve basic critical infrastructure.  Considering  the  current  revenue  predicament  of the Federal Government,  the  successful  implementation  of  the deregulation  policy  of  the  Nigerian  petroleum  sector  has  the potential of creating more jobs, bringing about development and enhancing the living standard of the people.


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