THE EFFECT OF DEREGULATION OF THE OIL SECTOR ON THE NIGERIAN ECONOMY

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

          The economic system practiced by any country determines the type of economic policy that country produces, that is determines the monopoly of power of power in production and distribution activities with special reference to the ownership, decision making as well as incentive structure operating in the country. Karl Polory (1964) distinguishes three (3) main types of economic system as the traditional (subsistence) planned (command) and market economy. However, the field of comparative economic system breaks the above categories into the capitalism, socialism and communism.

          The economic system operative in Nigeria are basically the capitalism, socialism and communism system. But with the collapse of the communism and socialism economic policies in 1986 to give rise to a unipolar economic system-capitalism the policy of “deregulation” has been found expedient to implement.

          This policy (deregulation) was first mooted during the military era but was given fillip by the present administration.

1.2     STATEMENT OF PROBLEM

          The problems surrounding the deregulation of oil sector which this research topic aims to investigate are:

Does deregulation affect the price of petroleum?

Does deregulation affect the price of goods and services?

Does deregulation encourage the growth of the economy?

Does deregulation improve the standard of living of the people?

1.3     PURPOSE OF THE STUDY

          The major objectives of this study are to access

1. The effects of deregulation of the oil sector on the Nigerian economy.
2. The season and problems of deregulation of the Nigeria oil sector.
3. To proffer solution based on findings on the study that will be useful for deregulation policy and achievement of stable balance of payments.

1.4     SCOPE OF THE STUDY

          The scope of this project will centre around the deregulation of the down stream sector as it affects other sectors of the economy with specific reference.

1.5     SIGNIFICANCE OF THE STUDY

          This study is significant in the sense that it looks into the deregulation of the Nigeria oil sector as a means of liberalizing the economy and encouraging competition hence, this study is beneficial to both academicians and non academicians as it will enable them know, and it will also suggest solutions to some of the problems associated with the policy.

1.6     HYPOTHESIS OF THE STUDY

To empirically carry out this research, the following hypotheses have been formulated for testing.

1. Ho 1: deregulation of the oil sector does not significantly affect the pump price of petroleum products.
2. Ho 2: deregulation of the oil sector does affects significantly the pump price of petroleum products.

1.7     LIMITATION OF THE STUDY

          The major limitation of this study is that the period of time given by the College for the study would not allow for an in-depth coverage of all the issues connected with the topic under study and collection of related information.

          A certain information analyze some observation may not be accessible e.g. independent marketers operation records may be regarded as strictly confidential and would not be developed to the research. And lastly finance is another constraint to an indebt study of this topic.