Petroleum Pricing And Politics Of Deregulation

Petroleum Pricing And Politics Of Deregulation
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Successive governments in Nigeria since 1999 have faced the challenge of whether or not to adopt deregulation policy in the downstream sector of the petroleum industry.

In fact, the decision of whether or not to adopt deregulation policy as a panacea for remedying the perennial fuel scarcity and arbitrary price increases in petroleum products has been an albatross around successive governments in Nigeria.

The political economy of deregulation policy in the downstream sector of the petroleum industry in Nigeria since the advent of democratic rule in 1999 contends that the subsidy regime of successive governments has not addressed the perennial scarcity and arbitrary price increases of petroleum products in the country. AljazirahNigeria maintains that the fuel subsidy regime has been an epitome of corruption as it has failed to address the original intentions of its founding.

We believe therefore in a complete deregulation policy in the downstream sector that will ensure government’s outright removal of fuel subsidy, remains the only antidote to addressing the perennial scarcity and arbitrary price increases of petroleum products by ambitious petroleum marketers in Nigeria. It is by so doing that market forces shall become the major determinants of the prices and distribution of petroleum products for the teeming consumers in Nigeria.

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AljazirahNigeria urges the government on the need to channel savings that would accrue from fuel subsidy removal into addressing the ailing infrastructure and human capital needs in the country. That is the only way to mitigate the biting effects that the attendant increase of fuel price would arouse.

There is no doubt that despite the enormity of the country’s wealth in both crude oil and gas reserves, Nigerian citizens have continued to wallow not only in poverty but in perennial scarcity of petroleum products occasioned by arbitrary price increases by over ambitious petroleum marketers.

These situations have persisted in the country over the years in spite of measures adopted by successive governments to cushion the effects by way of subsidy.

Subsidy regime dates back to 1973 when it became imperative after the civil war to adopt some short term measures to cushion the effects of the high cost of imported petroleum products on the people by the Federal Military Government led by General Gowon at the time.

The Federal Government at the time operated fuel subsidy with the aim of reducing the effect of actual market prices of the products on the people as the landing cost was a huge burden, hence the need to make the products not only available but affordable.

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Deregulation aims at promoting competition in areas previously considered to be natural monopoly of an individual, group of people or government enterprises.

There are two phases of deregulation: partial deregulation and full deregulation. While the former reiterates less government regulation with a view to increasing efficiency in the distribution process and protect the consumers’ rights, the latter entails an outright removal of statutory controls on oil price settings.

Subsidy on petroleum products has become a household concept in Nigeria. Subsidy is a deliberate government policy aimed at cushioning the effects of high oil prices at the international market by way of bearing the burden of price differentials of landing cost of refined products and the pump price. Subsidy regimes in Nigeria are known to be fraught with controversies as the amount of money set aside in the recent past on subsidy payments by government annually amounts to 30 percent of Nigeria’s annual budget. It reached a crescendo in the Nigeria’s 2011 and 2015 annual budgets, where subsidy alone amounted to between N1.4 and N1.5 trillion, representing about 30 percent of the country’s total annual budget, a scenario that is not only mind-blowing to a sane mind but capable of crippling the entire economy of the country.

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However, in the face of the lapses occasioned by multi-agency approach to the policy of pricing, it is embarrassing to see different organs of government announcing new prices of these products. Today, it is PPMC, next the PPRA and perhaps the Minister in another instance. AljazirahNigeria urges the government to streamline its operations in respect to which organ of government is solely responsible in order to save the nation the kind of monumental disaster that the recent PPPRA announced hike has perpetrated. The government in an embarrassing volte face has since dismissed the last PPPRA latest price regime.   

If government is indeed forthright with a deregulated downstream sector what other bill is it allegedly picking in the name of ‘under-payment’? Is it not another euphemism for the same monster – subsidy, we have purportedly jettisoned?


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