Deregulating the Downstream Sector of the Nigerian Petroleum Industry

Nigeria is endowed with abundant natural resources, particularly crude oil and gas. A major feature of the downstream petroleum sector in Nigeria is the dominance of the government in pricing, supply and investment. Nigeria currently relies heavily on the importation of refined petroleum products despite being a major crude oil exporter. Sequel to the fall in domestic output of refined petroleum products, successive Nigerian governments have spent so much yearly in subsidizing the importation of the products for onward sale at lower rates to the Nigerian populace. Considering the huge amounts spent overtime in subsidizing the consumption of petroleum products in Nigeria, the government decided to fully deregulate the retail price of petroleum having removed the subsidies on diesel and kerosene earlier. This paper provides insights into the key issues related to petroleum subsidy reforms in Nigeria. It presents the arguments for the removal of petroleum subsidy and the weaknesses of the current subsidy regime; the likely impacts of the reform measure and arguments canvassed against its withdrawal; possible options for the reform of the petroleum sector; and suggestions for successful implementation of the oil sector deregulation policy.