Subsidy Removal or Deregulation: Investment Challenge in Nigeria’s Petroleum Industry

LAWAL, Yekini Olawaiye (2014) Subsidy Removal or Deregulation: Investment Challenge in Nigeria’s Petroleum Industry. AMERICAN JOURNAL OF SOCIAL AND MANAGEMENT SCIENCES, 5 (1). pp. 1-10. ISSN 2156-1540, 2151-1559

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Abstract

The work was to examine the various regimes of petroleum products price increases, subsidy payments and its effectiveness or otherwise in stimulating investments in the industry in Nigeria and make recommendations on how to attract private investments. Secondary data were collected from the Nigerian National Petroleum Corporation (NNPC), Central Bank of Nigeria (CBN), Petroleum Products Pricing and Regulatory Agency (PPPRA), and government records. Goggle alert and social network sites were established to generate real time primary data which was supplemented with data obtained using structured questionnaire and interview. Subsidy removal had not generated investment in the downstream of the petroleum sector. Rather, it had generated violent reactions from the people. Investors who got licences for the construction of new refineries failed to take off for various reasons. Deregulation was recommended. Deregulation would have immediate negative effects on real household incomes. Negative reactions can be mitigated with adequate palliative measures and effective education and public enlightenment. On the short run, the prices of petroleum products would go up significantly but would drop when the products of the new refineries are released into the market. This study went beyond subsidy removal. It conducted empirical study on its effectiveness or otherwise on investment generation and proffer alternative. It revealed that subsidy removal did not stimulate investment. Alternative course of action was recommended.

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