i

EVALUATION OF THE DEREGULATION OF THE

DOWNSTREAM SUB-SECTOR OF THE NIGERIAN

PETROLEUM INDUSTRY (2003-2012)

BY

KARIKPO GOGOROBARI ERNEST

PG/M.SC/10/57539

BEING A RESEARCH PROJECT PRESENTED IN PARTIAL

FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD

OF MASTER OF SCIENCE DEGREE IN PUBLIC

ADMINISTRATION AND LOCAL GOVERNMENT.

DEPARTMENT OF PUBLIC ADMINISTRATION AND

LOCAL GOVERNMENT

FACULTY OF SOCIAL SCIENCES

UNIVERSITY OF NIGERIA, NSUKKA.

APRIL 2012.

i

TITLE PAGE

EVALUATION OF THE DEREGULATION OF THE

DOWNSTREAM SUB-SECTOR OF THE NIGERIAN

PETROLEUM INDUSTRY (2003-2012)

A

RESEARCH PROJECT

BY

KARIKPO GOGOROBARI ERNEST

PG/M.SC/10/57539

DEPARTMENT OF PUBLIC ADMINISTRATION AND

LOCAL GOVERNMENT

UNIVERSITY OF NIGERIA, NSUKKA.

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

AWARD OF MASTER OF SCIENCE (M.SC) DEGREE IN PUBLIC

ADMINISTRATION WITH SPECIALIZATION IN FINANCIAL

MANAGEMENT

APRIL 2012.

ii

APPROVAL PAGE

This research project has been approved for the Department of Public

Administration and Local Government, University of Nigeria, Nsukka.

BY

.

DR M.O IKEANYIBE PROF. FAB. O. ONAH

SUPERVISOR H.O.D

DATE.... DATE..

.. .

PROF. E. C. EZEANI EXTERNAL EXAMINER

DATE. DATE

iii

CERTIFICATION

This is to certify that Karikpo Gogorobari Ernest PG/M.SC/10/57539 has

written this thesis under our guidance and supervision and to the best of our

knowledge, his work is original and he did acknowledge all secondary information

and materials contained therein.

.

DR. M.O IKEANYIBE

SUPERVISOR

. ..

PROF. FAB. O. ONAH DATE

H.O.D

iv

DEDICATION

This work is dedicated to my unborn child, Aneme Ernest Karikpo and to

my late father HRH T.L Karikpo (JP).

v

ACKNOWLEDGEMENTS

My gratitude goes to God Almighty, who made the accomplishment of this

thesis a reality. I express my heartfelt gratitude to all my lecturers at the

Department of Public Administration and Local Government, their commitment

and selflessness is worthy of note and emulation.

I really appreciate the contributions of my supervisor Dr Okey Marcellus

Ikeanyibe who, without his meticullous rigorous perusal of this thesis work, the

present quality of the research work would not have been achieved.

My sincere gratitude goes to my family, my in-laws especially Batam Nanee and

his family for their support.

I also appreciate the moral and financial support of my friends and classmates.

Thank you all and God bless you.

Karikpo, G.E (JP)

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ABSTRACT

This study evaluates the deregulation of the downstream sub-sector of the

petroleum industry. This study arose out of the need to find solution to the sorry

state of the four refineries, the inefficiency in the distribution, the poor pricing of

petroleum products and the negative effects of monopolistic structure of the

downstream sub-sector. The study attempt to identify the challenges associated

deregulation of the downstream sub-sector and to examine the effects of

deregulation of the downstream sub-sector on petroleum product pricing in

Nigeria. The study examine the extent to which deregulation has impacted on

availability of petroleum product since 2003. The study progressed to identify what

policy options are there for improved performance in Nigerian downstream sub-

sector. The descriptive survey research design was used and data was collected

using questionnaire method. Chi-square and simple statistical methods was used

for data analysis. The findings of the study amongst others review deregulation of

the downstream is to open the market for new investors and reduce government

spending on subsidy payment. It is recommended that government need to create

an enabling environment for private individuals and companies to establish

refineries and should double the quantity of crude for domestic refining needs, in

this way, the country should target supplying the refined needs of these would be

investors.

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TABLE OF CONTENTS

Title page i

Approval Page .............................................................................................................. ii

Certification iii

Dedication ................................................................................................................... iv

Acknowledgment ........................................................................................................ v

Abstract.. vi

Table of Contents ........................................................................................................ vii

CHAPTER ONE: INTRODUCTION

1.1 Background to the Study ........................................................................................ 1

1.2 Statement of the Problem ...................................................................................... 5

1.3 Objectives of the Study ....................................................................................... 6

1.4 Significance of the Study ..................................................................................... 7

1.5 Scope and Limitations of the Study ................................................................... 8

CHAPTER TWO

2.1 Literature Review ................................................................................................ 9

2.1.0 Introduction ...................................................................................................... 9

2.1.1 Concept and Meaning of the Deregulation of the Downstream Sub-sector .... 9

2.1.2 Evaluation of the Downstream Petroleum Deregulation Policy 11

2.1.3 Benefits of the Deregulation of the Downstream Sub-sector ........................... 14

2.1.4 Challenges of the Deregulation of the Downstream Sub-sector ....................... 18

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2.1.5 Best Practices in the Global Oil Industry .......................................................... 22

2.2 Hypotheses ........................................................................................................ 29

2.3 Operationalization of Key Concepts ................................................................ 30

2.3.1 Methodology ..................................................................................................... 31

2.3.2 Data Gathering Instruments .............................................................................. 32

2.3.3 Population of the Study ..................................................................................... 32

2.3.4 Sample and Sampling Techniques ................................................................... 33

2.3.5 Validity and Reliability of Instrument for Data Collection .............................. 34

2.3.6 Method of Data Analysis ................................................................................. 35

2.4 Theoretical Framework ........................................................................................ 37

CHAPTER THREE:

3.1 Background Information on Deregulation of the Downstream Sub-sector .. 44

3.2 Background Information on the Nigerian Petroleum Industry .. 47

3.3 Background Information on Petroleum Product Pricing and Regulatory Agency (PPPRA) 56

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND FINDINGS

4.0 Introduction ......................................................................................................... 58

4.1 Data Presentation ................................................................................................ 58

4.1.1 Questionnaire Distribution . 58

4.2 Presentation and Analysis of the Substantive Data.............................................. 59

4.3 Findings and Discussion of Findings ................................................................... 78

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CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary ............................................................................................................. 81

5.2 Recommendations ............................................................................................... 82

5.3 Conclusion .......................................................................................................... 84

BIBLIOGRAPHY .................................................................................................. 85

APPENDIX . 90

1

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Over the last couple of years, the Nigerian oil industry has become known

for the phenomenon of petroleum product scarcity resulting in long and unending

queues at petrol stations and rising costs of production input and other operations

for all other sectors of the economy (Olawale et al, 2005).

The government felt that this is as a result of a number of risks associated

with the petroleum product exploration a