What is Deregulation?
Why does the Government want to deregulate?
What is the difference between the past and now?
In a free market environment that is envisaged,
don't you think the marketers would charge higher prices as there
won't be any control from anybody or organization?
So subsidy has been removed from oil prices?
Isn't it our birthright as a petroleum producing
nation to enjoy petroleum products subsidy?
With all the numerous law enforcement agents in the
country, why couldn't the government muster the political will to
put an end to smuggling at the borders?
After deregulation, chances are that prices of
petroleum products would skyrocket. How much would be the cost of
Petrol, Diesel and even Kerosene?
Will deregulation not further impoverish the
majority of Nigerians?
Some pressure groups have said repeatedly that
Government should grant private individuals the license to own and
operate refineries. Why couldn’t Government just do that instead of
still relying on importation?
Wouldn't you agree that the country should postpone
deregulation until some future time when there will be some
improvement in the life of our people?
Of what further benefit is deregulation?
What are the fundamental differences between
deregulation of the downstream sector and other sectors that have
How can we be sure that the government will extend
the gains of deregulation to the people?
As a citizen of Nigeria, what should one do to
ensure that Government successfully deregulates the downstream
sector of our oil industry?
|What is Deregulation?
Deregulation is opening up of the downstream sector of the
Petroleum Industry to competition among all players in the
industry. It means allowing every player the opportunity to
refine or import petroleum products for use in the country
in-so-far-as the products so refined or imported meet
quality specifications. It involves removal of entry barrier
into the supply and distribution of petroleum products.
Under the policy of Deregulation, no qualified and competent
person should be prevented from participating just as none
should be prevented from going under by any offer of
official assistance in whatever form, it is free entry, free
|Why does the Government want to deregulate?
The Federal Government wants to deregulate the
downstream sector, of Nigerian oil industry in order to:
ensure that petroleum
products are made available to
the consumers in an uninterrupted manner;
eradicate waste and corruption which are
consequences of tightly regulated economy;
ensure that the supply and distribution of petroleum
products are orderly and consumer-friendly;
channel money realized from the exercise to
development projects that will be beneficial to the majority of the
|What is the difference between the past and now?
In the past, government tried either 'appropriate pricing'
or 'price adjustment'. Those were mere palliatives and not
the solution to the comatose process of supply and
distribution of petroleum products in the country.
Now that the government has opened up the sector to
competition, scarcity will be a thing of the past. The
present arrangement will allow for competitive pricing which
will break the monopoly being enjoyed by NNPC. Deregulation
is indeed a more comprehensive policy for social justice and
|In a free market environment that is envisaged,
don't you think the marketers would charge higher prices as
there won't be any control from anybody or organization?
The Petroleum Products Pricing Regulatory Agency (PPPRA) was
established to superintend the deregulation process and
ensure that participants in the downstream sector operate
within acceptable limits. With competition, there will be no
monopoly. Competition brings out the best in terms of
creative response to issues and services provided by
The telecommunication industry in Nigeria has changed for
good with the advent of Global System of Mobile (GSM)
Within two years, Nigeria's teledensity had tripled. Can you
imagine the improved services private airlines have brought
to the airline business in Nigeria, the kind of creativity
and improved pleasurable hours private broadcasting
organizations have brought to the business of broadcasting
in Nigeria? Such is the power of competition. Now that the
downstream sector has been opened up to competition, soon
shortage of products would be history and the hidden
potentials of product derivatives and job creation would
begin to manifest.
|So subsidy has been removed from oil prices?
Subsidy means 'the loss of revenue that should otherwise
have accrued to the Federation Account if the crude oil
allocated for domestic refining and fuel consumption were to
be sold at International prices. With deregulation, the
federal government commenced the sale of crude oil to NNPC
at the international price as against the former practice of
concessionary prices. Through deregulation, the government
will now capture its entire take from the sale of crude oil
to be channeled into productive development projects.
However, recent spikes in crude and products prices have
necessitated government’s intervention so as to protect the
citizens from the immediate impact of international market
prices. Over time, it is hoped that the market will calm
down and the modulator mechanism being introduced will
enthrone greater participation and a more vibrant downstream
|Isn't it our birthright as a petroleum-producing
nation to enjoy petroleum products subsidy?
Subsidy poses a problem to the socio-economic development of
the country. As stated above, the subsidy on crude being
enjoyed by Nigerians was several billions of naira annually.
That amount of money should rather be channeled to
developmental projects for the benefit of all. Besides,
subsidy even negates fairness and equity. This is so because
the subsidy as currently practised in the country favours
the elite class much more than the poor. After all, an
average elite uses more litres of fuel than an average poor
In some other countries, subsidy is applied in areas such as
agriculture, health, education, etc. In these areas, subsidy
is beneficial to the majority. It is better to subsidise
production than consumption. If the subsidy is for
consumption, it should be properly targeted such as the new
feeding programme for school pupils.
|With all the numerous law enforcement agents in
the country, why couldn't the government muster the
political will to put an end to smuggling a1 the borders?
Nations of the world can only minimize the activities of
smugglers. Even in the United States of America, smuggling
exists as long as there are financial benefits for the
perpetrators. If the nation deploys an overwhelming number
of security agents to the borders as suggested, it would not
substantially solve the problem. On the contrary, it will
only add to the chain of participants. This is the reality.
Smuggling will probably continue even after the nation has
deregulated its downstream sector. The important thing,
however, is that with deregulation in place, smuggling will
cease to be injurious to our economy. The amount realizable
from the sale of every litre of product would be enough to
cover the cost of crude and refining, plus some level of
profit margin. In essence, the incentive for smuggling will
then be limited to the tax element captured by our
neighbours. Under this scenario, it is the neighbouring
countries that will worry more about
|After deregulation, chances are that prices of
petroleum products would skyrocket. How much would be the
cost of Petrol, Diesel and even kerosene?
The prices of these products will certainly not be as
obtained now. However, the new prices will not be so high as
to dig a big hole in the pockets of our compatriots.
Remember that the new prices of products will be determined
not by government fiat, but by the forces of supply and
demand, and by competition. Competition, you know, has a way
of forcing down prices. It also has a way of ensuring that
companies have a tight rein on production cost such that
wastes that could be passed on to consumers in form of high
prices are eliminated.
|Will deregulation not further impoverish the
majority of Nigerians?
Frankly, it is the present arrangement that is dynamic in
responding to situations. In the past, it was only in Abuja,
Lagos and Port Harcourt that products were bought at
official prices sometimes.
If we agree that a greater majority of Nigerians live
outside these few cities, this means that it is only a
minority of our people that are the beneficiaries of the
highly subsidised products.
Deregulation is therefore a policy that will swing the
pendulum to the advantage of the majority of our people
wherever the may be. It will ensure equity.
|Some pressure groups have said
repeatedly that Government should grant private individuals
the license to own and operate refineries. Why is Government
not building more refineries?
The Federal Government had always realised the importance of
private initiatives in the refining of crude oil in the
country. This was the case in the beginning before
government took over the function. Already, 18 companies
have been given licenses to establish and operate private
refineries, indicating government's commitment to ensure
adequate refining capacity. However, the nation in the
interim has to rely on importation because it will take some
time before the processes of establishing these refineries
are concluded. Building a standard refinery will take not
less than two years before it starts to operate fully. Much
more important however, is the fact that no private refinery
can operate successfully under a regulated market. It is
only now that Nigerians can expect to have new refineries
and a revamping of the existing ones under the privatization
In the past 2 years, efforts at getting some of the
companies to build refineries are yielding fruits with the
commencement of Orient Petroleum Resources and the Zenon
Petroleum and Gas Limited in Lagos.
|Wouldn't you agree that the country should
postpone deregulation until some future time when there will
be some improvement in the life of our people?
To postpone deregulation, even for one day, is dangerous for
the products supply and distribution in the country. If we
fail to deregulate now, the whole downstream sector of the
Nigerian oil industry would collapse and the consequences
would be too grave for our fragile national economy and for
all of us. Indeed, deregulation is an economic
Today, the three tiers of government are well funded as a
result of improved earnings from crude oil. It is our
collective responsibility to challenge and demand
commensurate performance in the provision of basic
amenities: improved education and health; aggressive
agrarian projects and excellent and functional
transportation modes nationwide.
|To what concrete project does is the government
want to commit money to be realised from deregulation?
It is the intention of Government to channel money to be
realised from deregulated downstream sector into the
provision of infrastructure like potable water, construction
of schools and colleges. Government also intends to spend the money it to boost
agriculture and invigorate the power sector and undertake
comprehensive road maintenance nationwide. There will also
be focus on economic empowerment of the people and providing
social safety net for the poor.
|Of what further benefits is deregulation?
Deregulation will generate employment opportunities to the
teeming youth graduates in the country. To start with,
private refinery owners and other providers of services that
will spring up consequent upon deregulation will employ more
hands to operate. Besides, industries that have suffered
from low capacity utilization and low productivity will come
alive as there would be enough fuel to power their engines.
|What are the fundamental
differences between deregulation of the downstream sector
and other sectors that have deregulated?
Basically, the underlying principles behind deregulation and
liberalisation are the same; removal of official
restrictions and bottlenecks that discourage participation
and investment, and the consequent opening up of the sector
with the aim of engendering maximum competition. This
applies in all cases so there is no fundamental difference
based on sectors. Therefore, the feat achieved in the
Communication, Aviation and Broadcasting sectors of our
economy can be replicated in the downstream sector if the
policy is followed to its logical conclusion.
|How can we be sure that the government will extend
the gains of deregulation to the people?
This is a democratic government. There are constitutional
checks and balances like the National and State Assemblies
that will ensure that government fulfills its promises. Also
Civil Societies are at liberty to pressurise Government to
ensure it fulfils its promises to the people.
|As a citizen of Nigeria, what should one do to
ensure the success of the deregulation of the
downstream sector of our oil industry?
To make the efforts of Government at deregulating the he
downstream sector a success, you are enjoined to among other
Ask more questions, understand more and always
remember that all of us will be winners when the deregulation
process is successfully completed.
Provide whatever enlightenment you may have on the
subject to your colleagues and neighbours.
Figure out how you can become a direct participant
in the process. It is your right to participate.
Believe in Nigeria and the ability of its people to
turn things around for the better.