ABSTRACT

The poor performance of Nigeria’s oil sector has affected the socioeconomic development of the country. This has made the government to formulate a deregulation policy to reform this ailing sector of the economy and to boost production and performance. However to understand the acceptability of this policy by organized labour, this study becomes very important. In this study three research questions were raised they include; why is government deregulating the petroleum sub-sector of the economy? What have been labour’s attitude to deregulation of petroleum products prices by government? Will deregulation of petroleum products prices lead to improvement in the economy? Interview was used as the primary method of data collection. A total of 160 persons were interviewed and three hypotheses acted as a guide in this work and were all accepted based on the analysis of data available using content analysis. The majority views and minority views were recorded. Also, some findings were made in this research, they include that the four state refineries in Nigeria do not meet their production capacities and prior to deregulation, government was the main participant in the petroleum sector. Some recommendations were made and they include; government should build more refineries to meet up with local demand for petroleum products and emphasis should be laid on the proper (TAM) turn around maintenance of the existing four state refineries. 

CHAPTER ONE 

INTRODUCTION 

1.1     BACKGROUND TO THE STUDY 

Economic reform for sustainable growth and development is a current trend, which occupies the minds of most policy maters, in a contemporary society like Nigeria. Since the 1980s successive governments in Nigeria have risen to reform the economy of the country. This monumentors development is all a function of declining capacity of the state for development and the growing influence of globalization (Nzongala-Ntalaja, 1997:1). 

Nigeria’s economic performance in the two decades prior to economic reforms was generally poor. Over the period 1992 to 2002, annual GDP growth had averaged about 2.225 percent. With an estimated population growth of 2.80 percent per annum, this implied a contraction in per capita GDP over the years that had resulted in a deterioration of living standards for most citizens. Inflation levels were high, averaging about 28.94 percent per annum over the same period. By 1999 (at the start of the first Obasanjo civilian administration), most of Nigeria’s human development indicators were worse than, or comparable to, that of any other least developed country (Okonjo-Iweala et al, 2007). 

Consequently, according to (Adeyemo, 2008) several economic reforms have been orchestrated by successive regimes in Nigeria, although most of them were externally driven. Beginning with the deliberate injection of foreign capital by the Obasanjo military regime which culminated in the civilian imposed austerity measure during the second republic. 

The government of General Ibrahim Babangida in 1986, in its quest for a viable economy, introduced Structural Adjustment Programme (SAP). The policy objective of the programme according to Alhaji U.K. Bello, the then Permanent Secretary Ministry of Finance, were to restructure and diversify the productive base of the economy; achieve fiscal stability and positive balance of payment; set basis for a sustained non-inflationary or minimal inflationary growth, and reduce the dominance of unproductive investment in the public sector. It emphasized deregulation, privatization, commercialization, subsidy removal and state withdrawal from major economic activities (Ogbimi, 2006). 

The efforts towards economic reforms in Nigeria intensified in 1999 consequent upon a civilian government that came into effect on May 29th, after a prolonged military rule. Among the economic reform agenda under President Ola Segun Obasanjo, were National Economic Empowerment and

Development Strategy (NEEDS), National Economic Empowerment Programme (NAPEP), Strategy (SEEDS), and Small and Medium Scale Enterprises Development Agency of Nigeria (SMEDAN), etc (Adeyemo, et

al 2008). 

Substantially, the deregulation of the downstream sector of Nigeria

Petroleum Industry was necessitated because of low capacity utilization of Nigeria’s state owned refineries and petrol chemicals plants, the sorry state of disrepair, neglect and repeated vandalism of the state ran petroleum products pipelines and infrastructures nationwide, the collateral damage of institutionalized corruption, with the frightening emergence of oil mafia that controls and coordinates crude oil theft (illegal bunkering) nationwide, and large scale cross-boarder smuggling of petroleum products (Braide, November 2003). In other to put a stop to these malaise, the government of Nigeria came up with an economic reform of deregulation of the petroleum industry which included the deregulation of products prices and removal of oil subsidies as a means of freeing government of its concurrent control and involvement in the business of refining, importation and distribution of refined petroleum products in Nigeria market. 

Sound as these arguments or reasons may appear, the organized labour was not totally convinced. As a result, labour after considering the above reasons vis-à-vis the feelings of Nigerian people took it upon herself to collectively negotiate and bargain with the governmentmost of the occasions. The NLC (Nigeria Labour Congress), advanced the following arguments to counter governments views: considering the rate of inflation, pricing is not commensurate with workers’ salaries; Nigeria being an oilproducing nation should not be left at the vagaries of the oil prices in the international market; petroleum products pricing should be done by all the stakeholders – the Federal Government, Nigerian National Petroleum Corporation (NNPC), the Nigeria Labour Congress (NLC), National Union of Petroleum and Natural Gas Workers (NUPENG), Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Market Women and Students Collectively (NLC Independent Report, 2000). 

Having argued this and as a remedy to the situation, labour proffered the following solutions as an immediate measure to tackle the economic reform: that government and NNPC should stop importation from Europe, but in spirit of ECOWAS, refine products in Abidjan refinery and pay refining fees; that government and NNPC should take appropriate steps to halt the problems of intractable product supply and distribution; that all refineries in Nigeria should be repaired as soon as possible; that refining should be literalized and that the downstream sector should be deregulated

(Ibid). 

1.2     STATEMENT OF THE PROBLEM 

Deregulation of petroleum prices in Nigeria has on each occasion generated divergent views and heated debates as to what should be done and how it should b e done. Different opinions are aired depending on one’s ideological leaning or one’s personal idiosyncrasy. It is based on this that (Ibru M, 2009) noted that deregulation is reasonable and sensible. That is the only way you could stop subsidizing a particular economic activity. Statistics have shown that in past years, subsidy had created a big financial burden on government, running into trillion of naira. So, it is reasonable to deregulate and stop channeling money to subsidy and to, rather, use such money for capital projects. The argument remained that the money used for subsidy could be use to provide infrastructure, like power supply, roads and other social infrastructure, like health centres and facilities for their nation’s educational sector, including the provision of better infrastructure in our universities, because the burden of subsidy had strongly inhibited government from providing these services. So, it is convenient for government to want to do away with the distortion, because subsidy is a form of distortion in the economy. 

Government argues that the deregulation of the petroleum sector came into effect with a view to operating a market economy, hence the removal of subsidy and government regulations. These measures in the view of government are imperative for sustainable development through job creation, efficient and effective production, diversified economy and selfreliance (Federal Republic of Nigeria, 2005). 

Labour debunked the views of government and criticized the resultant increase in the prices of petroleum products and especially the unilateral decision by government with a spill over effect on the general economic activities of the citizens (Oshiomole, 2004). It believed that with the deregulation, most subsides enjoyed by the people will be removed. The price of petroleum products will be high for the masses to bear. Buhari (2001) noted that the question of deregulation as far as Nigeria is concerned does not exist because we have to see at what level of development we are. Should we hand over our economy totally to skylocks, people who are not interested in the country?

To find a way out of this quagmire, labour would like to have some level of sustainability and stability in the sector because it if good for business, commerce and everyone. They opined it is also good for planning especially as no one can plan if people are unable to determine what an important index of the economy will be in the future (Oyibosonline.com,

2007). 

From the foregoing discussions the following questions are posed:

1.       Why is government deregulating the petroleum sub-sector of the economy?

2.       What have been labour’s attitude to deregulation of petroleum products prices by government?

3.       Will deregulation of petroleum products prices lead to improvement in the economy?

1.3     OBJECTIVE OF THE STUDY 

The general objective of this study is to contribute to the general debate on government policy on deregulation of the downstream sector of the petroleum industry. The specific objectives are as follows:

1.     To identify the reasons government chose to deregulate the petroleum sub-sector of the economy.

2.     To determine labour’s attitude to deregulation of petroleum products prices by government.

3.     To find out the impact of the deregulation of petroleum products prices on the economy. 

1.4     THE SIGNIFICANCE OF THE STUDY 

The significance of the study is very high. This research has both theoretical and empirical significance. Theoretically, this study is geared towards facilitating harmonious relationship and coexistence between labour and government. 

Another theoretical relevance of this research is that it will enlighten us on the improvement the economy of the country is making due to deregulation of the petroleum sub-sector. Furthermore, it will not only synchronize with the existing literature but will also serve as a convenient starting point for further inquiry in the same related area of study. 

Again, theoretically, this study is a contribution to the on-going debate about the economic reforms of the federal government especially as it concerns the deregulation of petroleum products prices and labour. There is sometimes face off between government and labour and at some other times dialogue and negotiation in the course of these reforms which has not been sufficiently analyzed and documented. This research consequently, will enrich the available knowledge on the nature, character and pattern of government/labour relation in the course of these economic reforms. It will also avail us the knowledge on labour’s contribution towards pricing of petroleum products and their consequent reaction to unilateral increases in petroleum pricing by government. 

With the knowledge obtained, a frame work for harmonious coexistence between the government and labour will be drawn to offer necessary guides in ensuring smooth and successful implementation of government reform programmes through a participatory process. 

Furthermore, this research has empirical significance. Firstly, it will be of immense benefit to the Federal Government, Ministry of Petroleum resources and labour. This is because this study will x-ray the reasons for economic reforms in Nigeria especially the reasons for federal government deregulation of the downstream oil sector and gains inherent in the reform programme. The study, by explaining the concept and facilitating understanding will help eliminate any friction that might occur between the government and labour. It is hoped this will bring increase in productivity in most sectors of the economy. 

Secondly, this study will yield information which will help labour and the generality of economic reform programmes. It will help to reveal the need and importance of economic reform as an essential bedrock to development in Nigeria. This will help convince labour and the general public on acceptability of these reforms. 

It also, will help policy makers in taking appropriate steps and taking the most rational decisions in petroleum products deregulation, having of course, weighted the negative and positive effects on the public. 

Nonetheless, it is an addition to the existing literature on the subject matter under study and therefore, serves as a stepping stone for further researchers to carry out their researches even far beyond this. 

1.5     SCOPE AND LIMITATION OF THE STUDY 

Economic reforms are a sine qua non to the development of any economy and country. From time to time, the way and manner in which the affair of the state is conducted as well as the benefits accruing to citizens in the process have had to undergo reviews depending on the exigencies of the time. This study is expected to cover various economic reforms of the government concentrating however on the deregulation of petroleum prices and labour. The period under review is between 1999 to 2005. 

The researcher encountered some difficulties in the course of data collection. Certain information required in order to highlight and analyze some observations were not for the coming e.g. Independent Oil Marketers Operation Records were regarded as strictly confidential and would not be divulged to the research. 

A work of this nature is often characterized with a review of past and current related literature. But, such materials were insufficient. However, the researcher was able to surmount this constraint through careful and articulate assessment of information especially those gathered from journal materials, government publications and newspaper reviews which were of immense

contribution in carrying out this project.   

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