AN APPRAISAL OF THE LEGAL FRAMEWORK FOR THE REGULATION OF UNIFORM PRICING OF PETROLEUM PRODUCTS IN NIGERIA
This thesis examined why the prices of petroleum products continues to be priced differently in Nigeria despite the existence of uniform pricing law on petroleum products. The study also examined the principle of deregulation of downstream petroleum sector in Nigeria in order to posit the key argument of how the policy affects economic activities in Nigeria. Arising from this, the study pay attention to the introduction of uniform pricing law from 1973 and the application of subsidy regime as a social welfare scheme to assist consumers have easy access to the product and also enable industries reduce cost of production of goods and services. The introduction of deregulation policy by the Federal Government was to cured the failure of the uniform pricing law in determining prices of petroleum product, however, the policy is faced with growing challenges in supply and distribution of petroleum products that has led to variation in prices of petroleum products all over the country. The research adopted doctrinal and empirical research methodologies by reviewing all principal statutes, subsidiary legislations and analysis of data collected from field survey on aspect of deregulation introduced into the downstream sector in order to resolve the problems of variation in price of petroleum products in the country. All issues relating to the study were carefully analyzed and examined, which culminated into findings and recommendations. From the analyses carried out, the study revealed that there are apparent conflicts between the Petroleum Act and the Petroleum Products Pricing Regulatory Agency Act with respect to price fixing of petroleum products. In the downstream petroleum sector though prices of petroleum products are fixed uniformly throughout the country the later introduction of deregulation policy by the government has caused variation in prices of petroleum products. Findings from this study further revealed that subsidies on petroleum products are only provided in the yearly budget estimates submitted to the National Assembly by the President of the Federal Republic of Nigeria instead of making such provision in the Uniform Price Law. The equalization schemes put in place by government to re-imburse marketers the cost of transporting petroleum products all over the country has not been able to stabilize petroleum products prices at a uniform price because of the inability of government to promptly pay marketers the cost incurred in transporting the products to different locations in the country. The lack of enforcement of the uniform pricing policy as contained in the Uniform Price Law by the various regulatory agencies in the downstream sector has caused scarcity and hoarding of petroleum products, which breeds sharp practices ranging from adulteration and increase in the price of petroleum products. Therefore, it cannot be concluded that prices of petroleum products are regulated only by the government under Section 6(1) of the Petroleum Act but by other variable factors that varies price of petroleum products. The thesis ends up with the recommendations that the National Assembly should harmonize the provisions of Petroleum Act and the Petroleum Products Pricing Regulatory Agency Act relating to price fixing in order to address the problems of variation in the price of petroleum products in the country. The repeal of the Petroleum Equalization Fund Management Board Act is overdue because the operation of equalization schemes is bedeviled by corruption and inefficiency. The Petroleum Products Pricing Regulatory Agency Act is not an efficient legislation that will deregulate prices of petroleum products in the country therefore it calls for more vibrant legislative interventions.
1.1 Background to the Study
There are two sectors of the Nigerian oil industry: the upstream and the downstream sectors. The concern of this research is focused on the downstream sector, which cover pricing, supply and distribution of petroleum products. In the beginning of petroleum production in Nigeria, the attention of government was focused mainly on the upstream sector of the Nigerian oil industry.1 However, due to rapid expansion in economic activities in the country after the civil war, the attention of the Federal Government was later extended to the downstream sector through the regulation of pricing, supply and distribution of petroleum products in the country. In the downstream oil sector, it is the government that set the policy of regulation in pricing, supply and distribution of petroleum products in the country.
The history of petroleum products‟ pricing can therefore be traced to the early colonial legislation called the Mineral Oils Act of 1914 that was later repealed by Military Decree No. 51.2 Some of the provisions of the Decree were later replicated into the Petroleum Act.3 Prior to 1973, petroleum product pricing was not uniform throughout the country as the pricing was under the control of domestic multinational oil companies who determined the price of petroleum products to
1 Owoye, T. and Adetoye, D. (2016). Political Economy of Downstream Oil Sector Deregulation in Nigeria. International Journal of Economics, Commerce and Management, Vol. IV, Issue 5. United Kingdom, pp. 674-689. 2 Petroleum Decree No. 51 of 1969 (now Petroleum Act, Cap. P.10, Vol. 13, Laws of the Federation of Nigeria, 2004) 3 Cap. P.10, Vol. 13, L.F.N., 2004.
reflect cost of refining and distribution locally.4 The cost of pump price at which a litre of petrol was sold depended on point of sale and this affected the distribution of petroleum products in the country. The Federal Government therefore took over the regulation of the downstream sector in order to encourage even distribution of products to all parts of the country through a uniform pricing system for all grades of products. In implementing the uniform price policy, the Federal Government decided to grant subsidy on petroleum products in order to allow marketers distribute petroleum products to all parts of the country without additional cost to consumers.
The Uniform Price Law introduced into the downstream sector was aimed at subjecting the demand and supply of petroleum products to a fixed price so that the product is sold at a uniform price all over the country. The reason government adopted a uniform price on petroleum products throughout the country, which started from 1973, was based on social welfare policy of making the product easily accessible and affordable by all consumers in the downstream sector. Three factors identified5, which influenced government position are; (a) the desire to protect the interest of the poor who could be hurt as a result of higher energy prices, (b) the need to reduce industrial cost as energy products are seen as critical inputs in production process and (c) the potential inflationary impact of higher energy prices. Thus, a major role of the government in introducing the uniform price
4 Nwaobi, G.C. (1992). Oil Policy in Nigeria. A Critical Assessment (1958-1992) (available at:
www.core.ac.ukdownload/pdt/9312754 – last visited 6/10/2016). 5 Adegunodo, M. (2013). Petroleum Products Pricing Reform in Nigeria: Welfare Analysis from Household Budget Survey. International Journal of Energy Economics and Policy. Vol 3, No. 4, pp. 459-472.
policy was to foster and sustain rapid socio-economic development and improvement in the living standard of the people in the country.
Petroleum products play a significant role in the development of Nigerian economy, therefore, any break in its chain, availability or price rationality, automatically follows a negative effect on the living standard of the citizens as their economic life shift downwards.6 An increase in the price of petroleum products essentially leads to increase in the cost of transportation, and the final consumer bears the effect through the purchasing of domestic food items or necessaries, which in turn affect the living standard of the people.
The Federal Government depends on petroleum products as one of the major sources of revenue, yet it continue to provide subsidies in the pump price of premium motor spirit (PMS), dual purpose kerosene (DPK), and automotive gas oil (AGO) to cushion the effect of poverty and underdevelopment.7 This explained why the structure of the Nigerian economy had evolved to position the downstream petroleum sector as petroleum products provide the internal energy requirements of the country for domestic and industrial use.
Section 15(1) of the Petroleum Act8 defines petroleum products to include; motor spirit, gas oil, diesel oil, automotive gas oil, fuel oil, aviation fuel, kerosene, liquefied petroleum gases and any lubrication oil or grease or other lubricant.
6 Uhunmwuangbo, S.O. and Aibieyi, S. (2012). Policy of Deregulation and Liberalization of the Downstream Oil Sector in Nigeria: The Implication on the Nigerian Economy in the 21st Century. Current Research Journal of Economics Theory 4(4): 112-119. 7 Chiemezie, D. (2013). Importation Pricing of Petroleum Products in Nigeria: The Shame of a Nation. The Economist
Magazine, 4th Edition, Vol. 4. A Publication of the Nigerian Economics Students Association (NESA), Uniben Chapter. (Also available at: http://www.theeconomistng.blogspot.com/2013/02/importation-pricing, last accessed: June, 2014). 8 Cap. P.10, Vol. 13, Laws of the Federation of Nigeria 2004.
Petroleum products are the juice that oils the Nigerian economy. Most of the energy needed for urban house-hold and industrial consumption come from these products, which total consumption contribution is estimated to be 6.9 metric tonnes.9 Therefore, the aim is to remove any fetter which restricts free pricing, distribution and control of any of these products in the market.
The first step taken to regulate petroleum product prices in Nigeria was through the Petroleum Act,10 which introduced the first uniform prices on petroleum products in 1973, where petrol, popularly known as premium motor spirit (PMS) was sold for 6½ kobo per litre all over the country. The Minister of Petroleum Resources acting under Section 6(1) of the Petroleum Act11 fixed 88 kobo and 18 kobo per litre of automotive gas oil (AGO) and dual purpose kerosene (DPK), respectively throughout the country.12 In order to ensure that marketers sell the products at uniform prices all over the country, government established the Petroleum Equalization Fund Management Board (PEF&MB) Act13 principally to reimburse marketers of petroleum products (PMS, AGO and DPK) the cost of transportation from the supply point to the retail outlets, in order to facilitate sell of these products at government control price throughout the country. By 1975 and in furtherance to its objective of selling petroleum products at uniform price throughout the country, government established the Pipelines Products Marketing
9 Industry Report/Oil and Gas Downstream. A publication of Agusto & Co. Limited, 2008. 10 Cap. P.10, Vol. 13, Laws of the Federation of Nigeria 2004. 11 Ibid 12 Salami, O. and Ayoola, K.A. (2010). The ‘War of Appropriate Pricing of Petroleum Products: The Discourse of Nigeria’s Reform Agenda. Linguistick Online 42, 2/10 (Ile-Ife). 13 Cap. P.11, Vol.20, Laws of the Federation of Nigeria, 2004.
Company (PPMC) as a subsidiary of the Nigerian National Petroleum Corporation (NNPC) to transport and market petroleum products all over the country. However, with the increasing incidence of bridging of products which was necessitated by pipeline failures and shut down of refineries and during Turn Around Maintenance (TAM), the Federal Government transferred administration of the bridging scheme hitherto administered by the NNPC to Petroleum Equalization Fund Management Board (PEF&MB) in 1998.
In 1986, government introduced the Uniform Retail Prices Order of 1986 under the Petroleum Act14 that regulate prices of petroleum products in Nigeria where products were reviewed upward to 39½ Kobo, 29½ Kobo and 10½ Kobo per litre for premium motor spirit (PMS), automotive gas oil (AGO) and dual purpose kerosene (DPK), respectively.15 In addition, there were existing agencies like the Department of Petroleum Resources (DPR)16 and the Nigerian National Petroleum Corporation (NNPC),17 which were conferred with the powers to regulate the supply and distribution of petroleum products in the downstream sector.
To actualize the policy objective in regulating prices of petroleum products in the downstream sector, a Special Committee on the Review of Petroleum Products Supply and Distribution (SCRPPSD)18 was set up in 2000, which led to the establishment of Petroleum Products Pricing Regulatory Agency (Establishment)
14 Cap. P.10, Vol. 13, Law of the Federation of Nigeria, 2004). The Order came into force on the 1st January, 1986. 15 S.1 Petroleum Products (Uniform Retail Prices) Order of 1986. A Subsidiary Legislation under the Petroleum Act, Cap. P.10. Laws of the Federation of Nigeria, 2004. 16 The Department was previously known as Department of Petroleum Inspectorate Division (DPID). 17 Nigerian National Petroleum Corporation Act, Cap. N.123, Vol. 12, Laws of the Federation of Nigeria, 2004. 18 The 34 Man Committee was set up on 14th August, 2000 under the Chairmanship of Chief Rasheed Gbadamosi and was inaugurated by the Secretary of the Federation, Obong Ufot Ekaete.
Act19. This was the beginning of a phased liberalization or deregulation of the downstream oil sector where the selling price of premium motor spirit (PMS), diesel (AGO) and kerosene (DPK) were set at a control price of N26, N26 and N24 per litre, respectively.20 The aim of this policy was to allow Nigerians enjoy the fruits of competition as obtainable in some other sectors of the nation‟s economy, such as telecommunication, banking, aviation, and among others.21 The analysis of the provisions of these principal statutes will reveal who has the power to fix prices of petroleum products. Is it the “Minister” as envisaged in the Petroleum Act or the “Board” as stipulated in the Petroleum Products Pricing Regulatory Agency Act? This is in view of the fact that the Petroleum Product Pricing Regulatory Agency Act did not repeal the power of the Minister under the Petroleum Act.
The shift to deregulation policy by the Federal Government was as a result of the failure of the uniform price law to address the perennial problems associated with pricing of petroleum products. The question is; can government effectively carryon with the policy of deregulation under the extant laws? Petroleum under Section 44(3) of the Constitution22 is a Federal Government property. Even if licence is given to individuals, will they sell as they like, or the Federal Government has to say how individual refine and distribute and how to sell?
19 Cap. P.43, Vol.14, L.F.N., 2004 20 Lawal, Y.O. (2014). Subsidy Removal or Deregulation: Investment Challenge in Nigeria‟s Petroleum Industry. American Journal of Social and Management Sciences, 5(1): 1-10. 21 Kalejaiye, P.O., Adebayo Kudus and Lawal, O. (213). Deregulation and Privatization in Nigeria: The Advantages and Disadvantages so far. African Journal of Business Management, Vol. 7(25), pp.2403-2409. 22 Constitution of the Federal Republic of Nigeria, 1999 (as amended).
To address the problems associated with loss in production, pollution and production shut-down caused by oil bunkering, pipeline vandalism and sabotage in the distribution and marketing of petroleum products, government promulgated the Petroleum Production and Distribution (Anti-Sabotage) Act.23 Under the Act, various offences and punishment for those who obstruct the production and distribution of petroleum products were provided under Section 1 of the Act.24 Apart from the legal frame work set in place by government to control the sale of petroleum products in Nigeria at uniform price, other variable factors also compete with the legal frame work in determining the price at which petroleum products are sold in the downstream sector. Such factors include, strikes by organized labour unions, demand and supply of petroleum products, smuggling of petroleum products to neighbouring countries, the state of the economy, cost of production and external factors. All these add to increase in price of petroleum products in the downstream sector.
1.2 Statement of the Problem
Despite the existing law on uniform pricing, petroleum products continued to be priced differently in Nigeria. This research is to find out why petroleum products continued to be priced differently in view of the law regulating the sale of petroleum products at uniform price throughout Nigeria.
23 Cap. P.12, Vol. 20, L.F.N., 2004 24 The Act defines a saboteur as any “person who does, aids another person, or incites, counsels or procures any other person to do any thing with intent to obstruct or prevent the production or distribution of petroleum products in any part of Nigeria, or willfully does anything in respect of any vehicle or any public highway with intent to obstruct or prevent the use of that vehicle or that public highway for the distribution of petroleum products.”
In view of the foregoing, this research has formulated the following research questions:
(a) Whether the provision of subsidies on petroleum products has been able to stabilize petroleum products prices in Nigeria.
(b) Whether other variable factors also influence the pricing of petroleum products apart from the regulatory mechanism adopted by the government in respect of pricing of petroleum products.
(c) Whether there is deregulation law on petroleum products or not, and whether these deregulation frameworks are really functioning satisfactorily, if not, why are the deregulation frameworks not functioning.
(d) Whether the implementation of deregulation policy will bring improvement in the supply and distribution of petroleum products that will lead to forces of demand and supply determine the price of petroleum products in the country.
(e) Whether there are limitations in the legal frameworks in respect of enforcement of uniform pricing of petroleum products in the country.
1.3 Aim and Objectives of the Research
The main aim of this research is to examine the legal framework for the regulation of uniform pricing of petroleum products in Nigeria. The objective of this study is to provide answers to the research questions by:
(1) Examining the law of uniform pricing policy and the implications of subsidies on petroleum products in the country.
(2) Examining the legality of deregulation policy on petroleum products pricing in order to determine whether it has legal backing in Nigeria.
(3) To provide findings and recommendations on lack of uniform pricing on petroleum products in Nigeria that will address the application of uniform pricing law on petroleum products.
1.4 Justification for the Research
Various literature that were examined in the area of this research concentrated attention to the upstream sector during the early period when the federal government started producing crude oil in the country. When government started the refining, supply and distribution of petroleum products in order to meet domestic consumption, the issue of pricing received pre-eminent attention by the government. This research is justifiable because the issue of pricing of petroleum products has dominated public discourse over the years in Nigeria, which is focused on subsidy and deregulation or appropriate pricing. Some time the implementation of policy objectives under the regulatory laws were distorted, especially with respect to pricing that are not in consonance with the supervisory and regulatory provisions in the principal statutes. The findings and recommendations that will come out from this research will assist government harmonize the laws that will lead to efficient implementation of its policy objectives
concerning the uniform pricing of petroleum products. This research will also serve as a future reference material in the area of pricing of petroleum products in Nigeria.
1.5 Scope and Limitations of the Research
This research covers the periods of 1970 to 2016, which within these periods the Federal Government introduced the uniform price policy. The discussions, which covered these periods, analyzed the pattern of increase in prices of petroleum products in Nigeria. The following statutes were therefore examined.
(a) The Petroleum Act.25
(b) The Petroleum Products Pricing Regulatory Agency Act.26
(c) The Petroleum Product (Uniform Retail Prices) Order 1986.27
(d) The Petroleum Equalization Fund Act.28
(e) The Petroleum Production and Distribution (Anti Sabotage) Act.29
(f) The Price Control Act.30
(g) The Nigerian National Petroleum Corporation Act.31
In realizing the objectives of this research, efforts were made towards visiting some organizations and operators in the downstream sector in order to solicit information that will aid in the write-up of the thesis. This involved additional
25 Cap. P10, Vol. 13, Laws of the Federation of Nigeria, 2004 26 Cap. P43, Vol. 14, LFN, 2004 27 Under Petroleum Act, Cap. P.10, Vol.13, op. cit. 28 Cap. P.11, Vol. 20, LFN, 2004 29 Cap. P.12, Vol.20, LFN, 2004 30 Cap. P.28, Vol. 20, LFN, 2004 31 Cap. N.123, Vol. 12, LFN, 2004
expenses in terms of transportation to these establishments. Another limitation was the problem encountered with some respondents that refused to return the questionnaire given to them within the selected areas. Their inability to respond promptly to the request provides another limitation on information that would have been necessary for wider interpretation of the data that were collected. Most opinions of scholars in the area of research were not readily available because majority of these researches were not conducted in Nigeria and where it was conducted, the core area relating to the law of Uniform Pricing was overlooked. The lack of case law on the subject also serves as a limitation to this research.
1.6 Research Methodology
This research involves a multi-disciplinary approach. The approach adopted in carrying out this research is principally doctrinal methodology where primary and secondary sources of law relating to the area of the study were analyzed. As part of the primary source, relevant statutes and judgments of courts were analyzed including data generated through an empirical methodology from a random study on the aspect of deregulation policy introduced in the downstream oil sector through structured interviews and questionnaire. The secondary sources of information were derived from opinions of jurists, experts that were contained in journal papers, conferences and seminar papers, textbooks, newspapers and magazines, and internet materials in the area of the research.
1.7 Literature Review
The downstream petroleum sector has attracted a lot of studies. In Nigeria, the literature on the sector is growing. A study of this nature can only make a selective review of the relevant and related studies. In the course of reviewing these materials, many scholars have proposed different theories in analyzing the effect of uniform pricing of petroleum products and the relationship among different variables. Many scholars have dwelt extensively on the subject of deregulation policy introduced in the downstream oil sector and were of the views that the policy has not witnessed impressive impact because there is no legal framework backing the policy. Therefore some related theories were reviewed to provide a framework within which to investigate the effects of price changes of petroleum products in Nigeria.
Olorunfemi, et.al.32 traced Federal Government involvement in the downstream sector of the petroleum industry as well as products pricing from 1973, in the era when money was not a problem to the country. The book also attempts to review a number of government policies on petroleum and by emphasizing what the government intended to achieve. It also provides insiders‟ experiences, explaining how ambitious and well-intended government policies have suffered avoidable setbacks by those who wield power in government. Lack of political will in implementing polices honestly and effectively is some of the reasons why the Nigerian National Petroleum Corporation (NNPC) has failed to reach its full
32 Olorunfumi, M.A., Adetunji, A. and Olaiya, A. (2014). Nigerian Oil and Gas – A Mixed Blessing? A Chronicle of NNPC’s Unfulfilled Mission. Published by Kachifo Limited, Yaba, Lagos, Nigeria.
potentials. This work therefore provides some information that is relevant to this study.
Salvatore‟s work33 is relevant to this study because it discussed the variable factors affecting oil price in the international market, which has come to be linked with the forces of demand and supply. In understanding oil prices, the author identified some key players; Russian and United States of America who through their competing interests have influenced the price of oil in the international market. Despite these challenges facing the oil producing countries, they were able to explore other decisions to scale down refining capacity in the face of increasing demand and the effects of global shortages of petrol, diesel, jet fuel, fuel oil and other lubricants.
Toyin and Ann34 examined the petroleum industry in the context of it being the most lucrative impact within the realm of international politics. Taking a well-balanced and objective approach to the complicated web of political and economic threads, the authors explained the relationship of international politics and the global oil industry as it affects every nation. A brief history of the major oil-producing countries, followed by a discussion of the Oil Producing and Exporting Countries (OPEC) were also examined by the authors, which provided some relevant insight to this study.
33 Salvatre, C. (2011). Understanding Oil Prices: A Guide to What Drives the Price of Oil in Today‟s Markets. Published by John Wiley &Sons Inc., USA. 34 Toyin, F. and Ann, G. (2005). The Politics of the Global Oil Industry: An Introduction. Praeger Publishers.
Irina35 in his book examined the vital role played by the Nigerian oil sector in developing the economy, especially during the oil boom era of 1970. Despite the contributions made in the economic development of the country, Nigeria ranked the third highest number of poor people in the world, after China and India, which can be seen from the low human development level, social conflicts and environmental degradation that have characterized the current state of development. This work will provide information on how the revenue derived from oil was mismanaged because of corruption that has eaten deep into the industry.
Olayiwola36 in his book examined the development that took place in Nigeria after independence and asserted that the country has undergone profound changes, by transforming the economy from primary agricultural society to an industrialized nation as result of the emergence of petroleum economy. Despite this performance, the author asserted that the structure of Nigeria‟s political economy is nearly the same as it was at independence. This work will not be useful to this study
Khan37 painfully examined the position of Nigeria as the most populous nation in the African continent with vast oil resources and the largest petroleum producer in the continent. As a key exporter of oil to both Western Europe and the United States (US), the political economy of Nigeria remains one of gross indebtedness, inefficiency and mismanagement. Here, the author brings together these issues in a far-ranging account of the Nigerian oil industry and explored the fraught
35 Irina, R. (2007). Oil Boom in Nigeria and its Consequences for the Country‟s Economic Development. Published by Munich, GRIN Verlag. 36 Olayiwola, P.O. (1987). Petroleum and Structural Changes in a Developing Country: The Case of Nigeria. Praeger Publishers, New York. 37 Khan, S.A. (1994). Nigeria: The Political Economy of Oil. Oxford University Press for the Oxford Institute for Energy Studies.
relationship between the government and foreign oil companies in one hand; and the financial constraints on domestic investment and the tragic lessons of an economy dependent on oil on the other. This literature falls short of being relevant in the area of this study, in that issues relating to uniform pricing policy introduced since 1973 were left out of the analysis.
Dogarawa38 in his book examined the politics of prices of crude oil in the international market which he warned that the current world oil price situation could further increase the pressure and struggle for reliable and big customers by oil producing nations in order to sustain the level of their oil revenue in foreign exchange. He observed that the delivery price and other factors will lead to wide disparities in the prices of crude oil in the international market, which he advised that Nigeria should align its economic policy on what is happening in the global. The short coming in the literature is that no detailed analysis was made concerning the downstream sector.
Ahmed‟s work39 provides useful information to this study by examining the law of deregulation introduced into the downstream sector in Nigeria. The book, which uses a multidisciplinary approach x-rayed the official reasons given by government to justify its fervent drive towards deregulation even though the requisite macro-economic policies that would make deregulation to flourish were
38 Dogarawa, L.B. (1999): Politics in Oil Shipments in Nigeria. Printed and published by Ibladaim Enterprises, Kaduna-Nigeria, p.66. 39 Ahmed, M. (2011). The Deregulation of the Downstream Oil Sector in Nigeria: An Appraisal of its Impact on the Economy. LAP Lambert Academic Publishing, Germany, 2011.
not put in place. In doing so, the book contended that, price hikes which appear to be the vogue and the main drive is not analogous with deregulation.
Toju40 in his book examined the prices of petroleum products in the Nigerian downstream oil sector, which have been a source of contention. The controversies surrounding the implementation of uniform price policy, the low refining capacity and product smuggling were some of the issues the author identified as probable causes of scarcity of petroleum products in the downstream sector. The literature is a good source material that will provide information necessary for this study.
Igbinovia‟s41 book provides necessary information concerning the nature of criminal activities taking place in the downstream sector, and how vandalisation of oil pipelines, oil thefts and bunkering around the Niger Delta region has caused the Federal Government substantial loss in oil revenue. The book presents a scholarly evaluation of the evolution, etiology, causes, nature, extent, characteristics, legal aspects that transcend rationale and modus operandi of the phenomena in the country. This work therefore preferred some solutions to these problems by suggesting proper enforcement of the necessary provisions of the law against offenders to serve as a deterrent to others.
Ajogwu and Nliam42 dissects the conflict associated with crude oil exploration, which inevitably comes with an environmental consequences through oil spills, well blown outs, fires and consequent ecological damage to land, vegetation and to
40 Toju, A. (2011): Deregulation of the Downstream Petroleum Sector in Nigeria: A Critical Analysis of Petroleum Product Prices and Subsidies. LAP Lambert Academic Publishing, Germany. 41 Igbinovia, P.E.. (2014). Oil Thefts and Pipeline Vandalization in Nigeria. Safari Books Nigeria Limited, Ibadan, 2014. 42 Ajogwu, F. and Nliam, O. (2014). Petroleum Law and Sustainable Development. Published by Centre for Commercial Law Development, Lagos, Nigeria.
aquatic life from direct pollution through oil on land, in water or from flare associated gas. This work is more relevant to the upstream sector than the downstream sector, which is the focus of this study.
Ukeje‟s work43 provides good information that is relevant to this study by examining the relationship of the Nigerian State with oil; and of the oil communities‟ engagement in violent conflict that have caused the State lose substantial amount of revenue. The work provides some suggestions on how Nigeria can improve its revenue base through agreement with Organization of Petroleum Exporting Countries (OPEC). The downstream sector, which has assumed alternative source of revenue for the state, government needs to promote peace and stability within the oil producing states of the Niger Delta Region.
Okechukwu‟s44 paper provides useful information to this study through his examination of the history of petroleum industry and the time government started regulating the prices of petroleum products in the downstream oil sector in Nigeria. The work also provided a history of uniform pricing regime and the functions of the newly introduced Petroleum Products Pricing Regulatory Agency Act and with very useful contributions on how to resolve the conflict of functions of Minister under the Petroleum Act and that of the Board of PPPRA, especially in determining the pricing policy on petroleum products.
43 Ukeje, C. (2003). Oil and Violent Conflicts in the Niger Delta. Obafemi Awolowo University Press. 44 Okechukwu, I.A. (2006). Petroleum Products Pricing: A Critique of the Legal Framework and the Fallacy of Subsidy in the Oil and Gas Sector. Ahmadu Bello University Law Journal, Volumes 24-25, pp.156-170
Biodun,45 Bagheba and Niyekpemi46 examined the refining capacity of the three refineries built in the country in the eighties; in Warri, Port-Harcourt and Kaduna whose combined capacity of 33 million barrel litres of petrol could not meet demand of petroleum consumption in the country. This work provides necessary information on how the downstream sector has been constrained by the poor state of the refineries and inability of government to meet demand of consumers of petroleum products in the country.
Another work that provides necessary information for this study is that of Okogu,47 which examined the controversy surrounding the adoption of an appropriate petroleum product pricing regime in Nigeria, against a background of poor public finances and endemic cross-border product smuggling, which has resulted in domestic shortages. According to the author, while the case for subsidy removal is overwhelming, the issue was unnecessarily politicized by governments, thus arousing great suspicion among the public that they cannot trust the government because of its poor records and financial accountability of money realized from the removal of subsidies on petroleum product.
Similarly, Lawal‟s work48 which is relevant to this study, presents the argument why subsidy removal on petroleum products has not generated investment in the downstream sector but rather violent reaction from the people.
45 Biodun, A. (2004): The Impact of Oil on Nigeria‟s Economic Policy Formulation. A paper presented at the Conference on Nigeria: Maximizing Pro-Poor Growth: Regenerating the Socio-economic Database. Organized by Overseas Development Institute in collaboration with the Nigerian Economic Submit Group, 16-19 June. 46 Baghebo, M. and Niyekpemi, O.B. (2015). Dynamics of the Downstream Petroleum Sector and Economic Growth in Nigeria, Vol. 3 No.4. Pulished by Redfame Publishing, pp. 134-144. 47 Okogu, B.E. (1995): Issues in Petroleum Product Pricing in Nigeria. Journal of African Economics, Vol. 4, Issue No. 2, pp.378-305. 48 Lawal, Y.O. (2014). Subsidy Removal or Deregulation: Investment Challenge in Nigeria‟s Petroleum Industry. American Journal of Social and Management Sciences, 5(1), pp. 1-10.
Though deregulation will have negative effects on real household income, adequate palliative measures and effective education can reduce the problems.
Frynas49 traced the history of litigation in the oil industry in Nigeria, especially in the upstream sector where there was a remarkable rise in litigation between oil companies and those affected by oil operations in Nigerian courts from the periods of 1981 to 1999. Most of the litigations involved were claims for compensations for oil spillage in the oil producing areas of Niger Delta region. This work will not be of value to this thesis.
Nwoko‟s work50 provides necessary information on the role of trade union activities in Nigeria since the return to democracy in 1999 and was of the view that trade union has been a platform for the Nigerian people to query government policies, actions and inaction. Trade Unions in Nigeria played these roles actively during the introduction of the privatization and commercialization of public institutions and services, incessant fuel hikes, retrenchment of workers and implementation of prescribed conditions and unfavourable policies of international institutions into the downstream sector.
Oladipo and Kehinde‟s work51 is another necessary literature in the area of this study. According to the authors, the history of „appropriate‟ pricing of petroleum product between 1999 and 2004 where petroleum products were fixed at uniform
49 Frynas, J. G. (1999). Legal Change in Africa: Evidence from Oil-Related Litigation in Nigeria. Journal of African Law. Vol. 43, No. 2. Published by Cambridge University Press, pp.121-150. 50 Nwoko, K.C. (2009): Trade Unionism and Governance in Nigeria: A Paradigm Shift from Laour Activism to Political Opposition. Information, Society and Justice, Volume 2 No. 2, June, pp 139-152. 51 Oladipo, S. and Kahinde, A. A. (2010): The ‘War’ of Appropriate Pricing of Petroleum Products: The Discourse of Nigeria’s Reform Agenda. Linguistik Online 42, 2/10.
prices throughout the country has become a source of concern to every government in Nigeria. Accordingly, prices of petroleum products became problematic from 2000 to 2007 as result of series adjustment in prices of petroleum product embarked by the Federal Government. From thereon, there were arguments by those who were in favour and those that were against the policy of subsidy removal on petroleum products in the country.
Oyinshi et al.52 provides more relevant information to this study why the removal of subsidy on petroleum product is not necessary now because of opposition by the Nigerian populace. The reason why there is opposition to deregulation policy is that not many people understood the difference between deregulation and subsidy removal, yet government is bent in implementing the policy.
Abu and Chidi53 examined why there is different perception by Nigerians on the deregulation and privatization policy of government in the downstream sector. This is because many hold the notion that such government policies will lead to job losses as well as high cost of living. Accordingly, the authors emphasized that for government to carryout its policy successfully, it need to carry the people along.
The view expressed by Owoeye and Adetoye54 provides relevant information to this study why oil has assumed political dimension. Whenever there is a slight
52 Onyisi, A.O., Okechukwu, I.E. and Ikechukwu E.E. (2012). The Domestic and International Implications of Fuel Subsidy Removal Crisis in Nigeria. Kuwait Chapter of Arabian Journal of Business and Management Review. Vol. 1, No. 6, February, pp. 57-80. 53 Abu, I.N. and Chidi, O.C. (2012). Deregulation and Privatization of the Upstream and Downstream Oil and Gas Industry in Nigeria: Curse or Blessing? International Journal of Business Administration, Vol.3 No.1, 5th January. Published by Sciedu Press. 54 Owoeye, T. and Adetoye, D. (2o16). Political Economy of Downstream Oil Sector Deregulation in Nigeria. International Journal of Economics, Commerce and Management, Vol. IV Issue 5. Published in United Kingdom.
increase in the price of petroleum products, it always attracts debate by those in favour and against the policy. The fierce debate between opponents and proponents of deregulation policy in the downstream sector shows political under tune; and different interpretations in the mind of the people as whether such policy should be regarded as increase in price of petroleum products or subsidies removal.
Kur55 evaluate consumer activities with specific interest in petroleum products manufacturing, distribution, retailing, marketing and products sourcing. Much of this work will be useful in the comparative analysis of the laws governing consumer protection and the law governing petroleum products marketing and distribution in Nigeria. This will help to balance the law relating to consumer protection and the impact of non-active consumer protection policies in the downstream sector, which breed sharp practices ranging from under dispensing, to selling adulterated petroleum products.
Adeola and Niyi56 opined that the growth in energy demand was taking place in Nigeria at a time of declining supply. Before the introduction of uniform pricing policy, the market was doing well by mediating the supply and demand of petroleum products. Premium motor spirit (PMS) was generally available at filling stations and there was nothing like hoarding, adulteration or smuggling of petroleum products. The authors brought out some silent issues that are relevant to
55 Kur, J.J. (2014). Consumer Protection and Deregulation Policy in the Downstream Petroleum Operation in Nigeria: Policy and Regulatory Issues Considered, Benue State University Law Journal, Vol. 5 No. 1, pp.25-50. 56 Adeola, F.A. and Niyi, F. (2006). Macroeconomic and Distributional Consequences of Energy Supply Shocks in Nigeria. AERC Research Paper 162. Published by the African Economic Research Consortium and Printed by Modern Lithographic (K) Ltd., Nairobi, Kenya, p.6.
this study by explaining why government introduced the uniform pricing policy in 1973 and how it took over the supply and distribution of petroleum products from the multinational oil companies in the downstream sector.
Arinze57 expressed concern on the upward adjustments in petroleum products prices and its impacts on inflation, high cost of living and inequitable distribution of income in Nigeria. This valuable material, which form the subject of this study revealed that between 1978 and 2007 various regimes in Nigeria increased prices of petroleum products a total of 18 times, mostly from 1990 to 2007. This brought negative impact on the economy as result of high cost of living.
Fiona, et al.58 took a look at the dilapidated infrastructure in the downstream sector of the Nigeria oil and gas industry and observed that despite being Africa‟s biggest oil producer, Nigeria imports more than 80% of its domestic fuel consumption. This was as a result of dilapidate state of the four refineries that cannot produce at full capacity. This makes the country vulnerable by importing petroleum products at increasing international crude oil prices that further increase domestic subsidies. This work provides necessary information for this study by exposing the inefficiency of the regulatory bodies address these critical issues that will resolve the problems.
57 Arinze, P.E. (2011): The Impact of Oil Price on the Nigerian Economy. Journal of Research and Industrial Development, JORIND
(9)1. (Also available at: www.transcampus.org/journals or www. Ajol.info/journals/jorind, last accessed: July, 2012). 58 Fiona, S., Maja, G., Caroline, H. and Miguel, N. (2011). Food, Finance and Fuel: The Impacts of the Triple F Crisis in Nigeria, with a Particular Focus on Women and Children, Overseas Development Institutes, p.1.
Manson, et. al.59 analyzed the cost of subsidies on petroleum products in Nigeria and explained the reasons why a jump in fuel price is never welcomed by the general populace. This work, which confirmed the views of other authors in the area of research conducted will formed part of the discussion in this study where effort will be taken to review the powers and duties of the various regulatory agencies in the downstream sector in order to determine how they have been able to enforce the law against those that contravened the regulations.
The work of Taimur, et. al.60 on domestic petroleum prices and subsidies show that the most robust pricing mechanism to avoid or surge in subsidies is to keep prices liberalized or otherwise to make suppliers compete for the market in a context of supporting institutional arrangements. The authors observed that the market for petroleum products is dominated by the public sector therefore price liberalization is necessary in order to reduce government control in the downstream sector. This work is relevant because it provides information that is necessary towards the write-up of this thesis.
Ovaga‟s work61 critically analyzed the effect of fuel subsidy removal on petroleum product in the downstream sector by providing some necessary information for this study why the introduction of the policy run contrary to the objective of uniform price laws that were introduced in 1973 and 1986. Much as this
59 Manson, N., Kennayo, O. and Robert, O. (2006). Does Subsidy Removal Hurt the Poor? The Case of Fuel Subsidies in Nigeria. In: Secretariat for Institutional Support for Economic Research in Africa (SISERA) Working Paper Series No.2 and published by African Institute for Applied Economics, Enugu, Nigeria. 60 Taimur, B., Amie, M., David, C. and Joseph, N. (2007): Domestic Petroleum Product Prices and Subsidies: Recent Development and Reform Strategies. International Monetary Fund (IMF) Working Paper – WP/07/71, Fiscal Affairs Department. 61 Ovaga, O.H. (2012). Subsidy in the Downstream Oil Sector and the Fate of the Masses in Nigeria. Kuwait Chapter of Arabian Journal of Business and Management Review, Vol. 1, No.6, pp.15-33.
examination of the law is necessary, it will be limited to the power given to the Ministry under the Petroleum Act only.
Enebeli, et. al.62 provided useful information on the exploration and oil price dynamics in the Nigerian petroleum industry. The author explained how Nigeria, in a quest to exploit her natural resources efficiently adopted various strategies and policies relating to licensing, taxation, royalty and general legal instruments to ensure orderly development of petroleum exploration and production. Since the elements of Nigerian petroleum exploitation strategy are rooted in its legal and fiscal system, government adopted a concession agreement by allowing the Nigerian National Petroleum Corporation (NNPC) acquired equity interest in the concessions on its behalf.
Maitumo63 and Asuguo64 works revealed an impeding problem in the supply of petroleum products in the downstream sector, which constrained consumers‟ demand in the country. The gap created in the supply of crude oil to the refineries invariably mean a reduction in the quantity of refined product for consumption in the downstream sector. This literature, which is a relevant material for this study, explained why the distribution of petroleum products through the pipelines has not been able to improve supply in the downstream sector because of its constant vandilization.
62 Enebeli, E.E., Cheng, J. and Wang X. (2012). Petroleum Exploration and the Oil Price Dynamics: A Case Study of Nigerian Petroleum Industry. African Journal of Business Management, Vol. 6(9), pp. 3342-3348. 63 Maitumo, M.M. (1999): Impact of Impediments to Petroleum Products Supply. In: Energy Crisis in Nigeria: Causes, Effects, Solutions.Published by the Group Executive of PENGASSAN in collaboration with Softsolid Communications Limited, Lagos, pp. 77-78 64 Asuguo, E.I. (1999): National Energy Crises: An X-Ray. In: Energy Crisis in Nigeria: Causes, Effects, Solutions. Published by the Group Executive committee of PENGASSAN in collaboration with Softsolid Communications Limited, Lagos, p. 93.
Obi65 argued that the abundant oil endowment in Africa has largely been associated with high levels of violence and corruption based on the political economy of oil. The conflict in the Niger Delta oil producing region of Nigeria offers a good case for an analysis of the nexus between oil and violent conflict. Thus, the roots of this violent conflict is linked to the manner in which oil is produced and extracted; and by alienating the people from their lands and livelihoods, the highly skewed distribution of its benefits to the people were some of the likely causes of conflicts.
Owarieta66 analyzed the effects of scarcity of petroleum products that is always experienced whenever there is slight increase in the pump price of petroleum products. The danger posed by this ugly situation is that motorists always resort to panic buying and hoarding of the products by dealers in order to cause artificial scarcity. This in turn leads to increase in the pump price of petroleum products in the black market and high cost in transportation and other goods and services. This work is useful to this study by revealing the causes of scarcity of petroleum products and what the law is concerning hoarding, adulteration and diversion of petroleum products to black market.
Akpotaire67 assessed the concept of privatization and deregulation policy in Nigeria by tracing its origin to 1980s. The analysis revealed that the concept, even
65 Obi, C.I. (2014). Oil and Conflict in Nigeria’s Niger Delta Region: Between the Barrel and the Trigger. The Extractive Industries and Society. Vol.1, Issue 2., pp.147-153. Published by Elsevier Ltd. 66 Owarieta, G. (1999): Industrial Relations Implication of Economy of Scarcity of Petroleum Products. In: Energy Crisis in Nigeria: Causes, Effects, Solutions. Published by the Group Executive Committee of PENGANSSAN in collaboration with Softsolid Communications Limited, Lagos. 67 Apkotaire, V. (2004): Privatization and Deregulation of the Downstream Sector of the Oil and Gas Sector; Challenges for Labour.
though was a recent phenomenon introduced into Nigeria to dismantle the various laws that entrenched economic regulation or deregulation. This work provides a useful material to this research by tracing the history and reasons behind the policy of deregulation that was introduced into the downstream sector.
Said68 however explained that the policy of deregulation emanated from the International Monetary Fund (IMF), the World Bank and the Paris Club, who seek to reconstruct the object, nature and basis of social welfare services from a social and public orientation to a private one, which has implication for efficiency, social and class inequalities. This work explained how the World Bank‟s policy influenced the macro-economic policy of Nigeria, which has formed part of government policy of deregulating the downstream oil sector.
Ogunbodede, et. al.69 identified multiple negative effects of incessant increase in the price of petroleum products in downstream oil sector, which always affect the cost of transport fare, hoarding, and long queue, lose of man-hour at work and diversion of petroleum products to the black market. The authors identified the following problems as causes of scarcity of petroleum products in the downstream sector, which include; irregular maintenance of the refineries, smuggling of petroleum products, pipeline vandalization, strikes by oil workers.
Faculty of Law Lecture Series No.3, University of Benin, Benin-City, Nigeria. 68 Said, A. (1999): Privatization Policy and the Delivery of Social Welfare Services in Africa: A Nigerian Experience. Journal of Social Development in Africa, Vol. 14 No. 2, pp. 87-108. 69 Ogunbode, E.F., Illesanmi, A.O. and Olurankinse, F. (2010): Petroleum Motor Spirit (PMS) Pricing Crisis and the Nigerian public Passenger Transportation System. Scientific Research Publishing Company, Ibadan, Vol. 5 No. 2.
Osi and Dele70 expressed concern on the declining and erratic supply of petroleum products in the country, which was caused by the dilapidated infrastructural facilities in the downstream sector. This impacted negatively on the lives of consumers who spent most of the earnings in purchase of other goods and services at a high cost. Factor this is responsible for this due to scarcity in the supply and distribution of petroleum products. This explanation provides a better understanding of the nature of the problems associated with petroleum distribution in the country and how to proffer possible solutions that will reduce these problems.
Onwioduokit and Adenuga71 identified inadequate energy planning by government in Nigeria as a factor that has compounded the scarcity of petroleum products in the country. The inability of government to make proper forecast in energy demand is responsible for crises whenever there is slight increase in the pump price of petroleum products. This work will serve a good source of material in this study by providing a comparative analysis on energy demand and supply in the country.
Eme and Onwuke72work made valuable contributions to this study by examining the challenges facing the downstream deregulation policy, which include; lack of sincerity on the part of government to deploy the revenue derived from subsidy removal to other sectors of the economy, corruption going on in the
70 Osi, A.A. and Dele, B. (2006): Petroleum Product Scarcity: A Review of the Supply and Distribution of Petroleum Products in Nigeria – OPEC Energy Review. Published by John Wiley and Sons. 71 Onwioduokit, E.A. and Adenuga, A.O. (2002): Empirical Analysis of the Demand for Petroleum Products in Nigeria. Published by International Economic Relations Department, Central Bank of Nigeria Annual Report on The Persistent Shortages of Petroleum Products in Nigeria: A Re-Appraisal of Causes and Possible Remedies. Special Economic Review Series, Vol. 1 No.1, p.1. 72 Eme, O.I. and Onwuke, C.C. (2011). Political Economy of Deregulation Policy in Nigeria: The Challenges Ahead. Journal of Business and Organizational Development, Vol. 2.
downstream sector and lack of access by the targeted beneficiaries of the programme. The Nigerian Labour Congress (NLC) and other pressure groups in the country argued that introduction of deregulation into the downstream sector is a process that is either inadvertently or deliberately conceived to take money away from the pockets of all Nigerian income earners who live below N360.00 per day that are the real victims of the programme.
Adagba, et. al.73 examined deregulation in the context of anti-subsidy removal strikes embarked by NLC from 2000 to 2012, which grounded economic activities. These crises have resulted in production shutdowns, high cost of obtaining fuel from the black market and scarcity or unavailability of petroleum products leading to N1.3 trillion in revenue loss. This work represents a pioneer effort in both direction and focus, which will be helpful in this study.
Onyekpe74 observed that the concepts of liberalization and deregulation are aimed at achieving unobstructed economic activities, which seeks to remove all obstacles to trade, production and investment. By emphasizing the importance of freedom of economic activities and dominance by private enterprises, the author was able to explain how Nigeria government stands to benefit from the policy of liberalization and deregulation of the downstream sector. This is a useful material that provides the necessary understanding of the legal framework for privatization and commercialization generally.
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