ABSTRACT
The Nigerian oil and gas industry has been experiencing a showdown since the announcement of the downstream oil deregulation policy. This paper, therefore, seeks to analyse the relationship between deregulation of the downstream sector and Nigerian economic performance using annual data from 2015 to 2018. The Ordinary Least Squares (OLS) regression method was employed to analyze the data. Chow Test was used to determine parameter stability of the regression model, while Granger Causality Test was used to predict the direction of influence. The findings reveal that increase in price of petroleum products and inflation rate were not as a result of deregulation, and deregulating price of petroleum products significantly influence economic growth with marginal inflation. The paper recommends that government should encourage private sector participation in the oil and gas industry.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Historically, major petroleum marketing companies were the main sources of petroleum product’s supply. The companies transported and distributed the products relying on their distribution and retail outlets. This was an era of Pre- regulation 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 country’s 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 product 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 2000. 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 in spite of increases in prices of products since 1999. The Olusegun Obasanjo administration on coming on board decided to gradually withdraw the subsidy on petroleum products to allow the mechanics of market forces to take its full course. This again, resulted to frequency increase in petroleum products prices.
1.2 Statement of the Problem
Petroleum products supplies have always been problematic for successive Governments in Nigeria. With the new democratic dispensation, the supply and distribution of petroleum products improved but this was without a frequent price increase in petroleum products. With few months to the end of the Obasanjo’s regime, the ugly incidence of petroleum scarcity surfaced again and one begins to wonder if there is any solution to this problem.
