i

THE EFFECTS OF ROLLING BACK THE STATE ON DEVELOPMENT OF NIGERIA’S POLITICAL ECONOMY (2003 – 2007).

BY

UMO-UDO, NDIFREKE SUNNY PG/Ph.D/03/34787

A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF DOCTOR OF PHILOSOPHY

(Ph.D) IN POLITICAL SCIENCE (POLITICAL ECONOMY) UNIVERSITY OF NIGERIA, NSUKKA

SUPERVISIOR: DR. OGBAN OGBAN-IYAM

DEPARTMENT OF POLITICAL SCIENCE UNIVERSITY OF NIGERIA,

NSUKKA

SEPTEMBER, 2010

ii

CERTIFICATION

This is to certify that this thesis “THE IMPACTS OF ROLLING BACK THE

STATE ON DEVELOPMENT OF NIGERIA’S POLITICAL ECONOMY (2003 –

2007)”, was carried out by UMO-UDO, NDIFREKE SUNNY with Registration

Number PG/Ph.D/03/34787. It is a pre-requisite for the award of a Doctor of

Philosophy (Ph.D) degree in Political Science of the University of Nigeria, Nsukka.

Dr. Ogban Ogban-Iyam Signature:……………. Date:…………………. Supervisor

Prof. O. Igwe Signature:……………. Date:…………………. Head of Department

---------------------------------- Signature:……………. Date:…………………. External Supervisor

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DEDICATION

This thesis is dedicated to the Almighty God, for giving me the grace to

complete this programme. My parents Elder and Mrs. Sunny Umo-Udoh, who

sacrificed everything to make sure that I attain this height, my dear wife Mrs.

Enyeneama Ndifreke, daughter Miss UnwanaObong Ndifreke and my son master

Inimfon Ndifreke for their love and patience which has seen me through this

programme.

iv

ACKNOWLEDGEMENT

I owe much gratitude and appreciation to many people that have

contributed in one way or the other towards the successful completion of my

programme and this work.

My sincere appreciation goes to my supervisor Dr. Ogban Ogban-Iyam,

who took time to encourage and guide me during my stay in Nsukka from the

seminar level to the final completion of this work. I commend him for finding time

from his busy schedule to go through the entire manuscript to make all the

necessary corrections. I must confess that the standard of this work has been

raised by his invaluable input and suggestions. Am also grateful for allowing me

share from his immense wealth of knowledge.

I sincerely appreciate my parents Elder and Mrs. Sunny Umo-Udoh for their

prayers and sacrifices that I must attain this height and level that they never

attained. My special thanks to my wife Mrs. Enyeneama Ndifreke, my daughter

Miss UwanaObong Ndifreke and my brother, Barr. Ekemini S. Umo-Udo for their

endurance and patience during the periods of my long absence from home.

In the same vein, I also appreciate all my friends who have made the

period of my stay in Nsukka during this programme worthwhile. They are Nsikan

Paul Akpan, Nsikak Sunday Awah, Elder (Dr.) Etop Ndiyo, Kufre Essien, Eno

Francis Udo-Umoh, Mfon Eyo, Mrs Ekaette Edelduok, Mrs. Caleb, Ifreke

Udoidem, and Engr. Idorenyin Markson. Am not forgetting the company of Messrs

Nse P. Uto (aka owo usai), Nseobong Okpura, Sunday Chris Okon Akpan, Mrs.

Stella Etukufot, Emma Ihenacho, Mike Nwokedi, Okafor Innocent and Edem

Solomon who processed the manuscript, you guys were simply wonderful.

v

My appreciation equally goes to Mr. and Mrs. Anietie M. Akpan for their

love and support. I am greatly indebted to Dr. and Barr. (Mrs) Charles Akpabio

who provided me with accommodation in the course of my visit to Abuja to obtain

data from the PPPRA and the Federal Ministry of Finance for this work. I am not

forgetting Messrs Idong Essien and Joe Ita who made it possible to link up with

and collect information from PPPRA. My inlaw Mr. Odudu Udo also share in this

thanks. You have done noble.

My special thanks to the staff in the Department of Political Science,

University of Nigeria, Nsukka, who through their contributions and discussion

during post graduate seminar presentations helped to enrich my knowledge in

research. The include Prof. M.I.O. Ikejiani-Clark, Prof. Obasi Igwe, Prof. O.

Ibeanu, Prof. E.O. Ezeani, Prof. Jonah Onuoha, Dr. Ken Ifesinachi and Dr.

Alloysius Okolie and Mr. B.C. Nwosu. My thanks also go to my colleagues in the

University of Uyo, Dr. Ukana B. Ikpe, Dr. Okon Eminue, Dr. Robert Dode, Dr. B.

C. Onuoha, Dr. Godwin Akpan and Dr. Austin Odey. I lack the words to describe

your support. May God bless you all.

Finally I am indebted to the various authors, researchers and agencies

whose works are cited in this thesis. Above all, I give thanks to the Almighty God,

for his love, kindness, sustenance and journey mercies throughout the entire

programme. Glory and honour be unto him.

Umo-Udo, Ndifreke Sunny

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ABSTRACT

The study focused on the deregulation of the downstream of Nigeria’s petroleum sub-sector as an aspect of Rolling back the state in Nigeria. Deregulation of the downstream of the petroleum sector is occasioned by the removal of subsidies on petroleum products. This leads to a hike in the pump price of petroleum products which has brought untold hardship on the people. According to government, it spends a huge amount of money on subsidizing fuel products. Thus government resources previously used for subsidy of petroleum products will be used to undertake more development programmes such as construction of good roads, clinics, hospitals and good drinking water etc. for the general public. Thus, the broad objective of the study was to understand the effects of rolling back the state on the political economy of Nigeria. Its specific objectives were; to examine the impact of deregulation of the downstream of the petroleum sector on the road transport and public health sectors of the Nigerian economy within the period 2003-2007. Data for the study were generated through the observations of primary and secondary sources and interview of respondents. The data were analysed using tables, percentage and correlation analysis. The social production theory propounded by Karl Marx and other exponents provided the basis under which the study was carried out. The framework was applied to the explanation and understanding of deregulation as a capitalist mode of production in the road transport and health sectors of the economy. The findings of the study shows that deregulation of the downstream of the petroleum sector allowed the private sector owned road transportation system to increase the cost of transport fares anytime the government announced increase in the pump price of products. An increase in the cost of road fares translated into increase in prices of goods and services which ultimately resulted in inflation. Equally the huge amount derived from petroleum has not been judiciously expended for building and construction of roads. On the health sector, this has led to poor quality and inadequacy of health care services provided in public hospitals which in turn has made the private sector an unavoidable choice for those seeking health care. The fees charged in private hospitals are expensive and affordable to the rich, with some of them travelling abroad for medical care while the poor are forced to patronize patent medicine stores, quack doctors and the use of herbs for health care delivery. The research recommends that owing to the poor state of social services and infrastructure, government should suspend the idea of deregulation as this will lead to increase in cost of petroleum products, cost of essential services and inflation which will result in hardship on the already impoverished Nigerians.

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TABLE OF CONTENT

Title Page-- -- -- -- -- -- -- -- -- -- i

Certification -- -- -- -- -- -- -- -- -- ii

Dedication -- -- -- -- -- -- -- -- -- -- iii

Acknowledgement -- -- -- -- -- -- -- -- iv

Abstract -- -- -- -- -- -- -- -- -- -- vi

Table of Contents-- -- -- - -- -- - -- -- vii

Lists of Tables -- -- -- -- -- -- -- -- -- x

List of Abbreviations-- -- -- -- -- -- -- -- xi

CHAPTER ONE: INTRODUCTION

1.0 Introduction-- -- -- -- -- -- -- -- -- 1

1.1 Statement of Problem-- -- -- -- -- -- -- 10

1.2 Objectives of the Study -- -- -- -- -- -- -- 15

1.3 Significance of the Study-- -- -- -- -- -- -- 15

1.4 Literature Review -- -- -- -- -- -- -- -- 16

1.5 Theoretical Framework -- -- -- -- -- -- -- 24

1.6 Hypotheses-- -- -- -- -- -- -- -- -- 31

1.7 Methodology-- -- - -- -- -- -- -- 31

1.7.1 Research Design -- -- -- -- -- -- -- -- 31

1.7.2 Population of Study-- -- -- - -- -- -- 32

1.7.3 Sampling Procedure and Selection-- -- -- -- -- 33

1.7.4 Method of Data Collection -- -- -- -- -- -- 34

1.7.5 Method of Data Analysis -- -- -- -- -- -- -- 34

1.8 Clarification of Concepts and Terms -- -- -- -- 35

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CHAPTER TWO: DEREGULATION: CONCEPTS AND THE BASIC THEMES

2.0 Meaning and History -- -- -- -- -- -- -- 43

2.1 Forms of Deregulation -- -- -- -- -- -- -- 44

2.2 Objectives of Deregulation -- -- -- -- -- -- 46

2.3 The Policy of Deregulation in Nigeria -- -- -- -- -- 47

2.4 Benefits of Deregulation-- -- -- -- -- -- -- 49

2.5 Deregulation and Development -- -- -- -- -- -- 51

2.6 Deregulation and the Nigerian Economy -- -- -- -- 53

2.7 Reregulation and Regulation -- -- -- -- -- -- 55

CHAPTER THREE: DEREGULATION OF THE PETROLEUM SECTOR

3.0 Introduction-- -- -- -- -- -- -- -- -- 57

3.1 Background to Deregulation of the Downstream of the Petroleum Sector -- -- - -- -- -- -- -- 57

3.1.1 Petroleum Products Processing and Distribution and the State of the Refineries-- -- -- -- -- -- -- -- 57

3.2 The Special Committee on the Review of Petroleum Products Supply and Distribution (SCRPPSD)-- -- -- -- -- 64

3.3 Petroleum Products Pricing Regulatory Committee -- -- -- 66

3.4 Petroleum Products Pricing Regulatory Agency ---- -- 68

3.5 Deregulation and Liberalization of the Downstream of the Petroleum Sector-- -- - -- -- -- -- -- 70

3.6 Increases in the Prices of Petroleum products-- -- -- -- 72

3.7 Variations in the Pump Price of Products-- -- -- -- 73

3.8 Sale of Refineries and Other Infrastructure-- -- -- -- 74

3.9 State of Affairs in the Petroleum Sector after Deregulation and Liberalisation -- -- -- -- -- -- -- 76

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CHAPTER FOUR: ROAD TRANSPORT SECTOR

4.1 Introduction -- -- -- -- -- -- -- -- 80

4.2 Budgetary Allocation on the Road Transport Sector-- -- --- 83

4.3 Increase in the Cost of Transport fares-- -- -- -- -- 87

4.4 Presentation of Data-- -- -- -- -- -- -- 90

4.5 Data Analysis-- -- -- -- -- -- -- -- 90

4.6 Discussion of Findings-- -- -- -- -- -- -- 92 CHAPTER FIVE: PUBLIC HEALTH SECTOR

5.0 Introduction -- -- -- -- -- -- -- -- 95

5.1 Funding and Resources for Health Care Delivery-- -- -- 97

5.2 Usage and Accessibility to Health Care Delivery Facilities and Personnel-- -- -- -- -- -- -- -- 99

5.3 Vital Statistics and Demographic Characteristics-- -- -- 101

5.4 Global trends in the Health Sector-- -- -- -- -- 104

5.4.1 Comparative Benchmark Analysis-- -- -- -- -- 104

5.5 Budgetary Provisions for Health Care Delivery -- -- -- 105

5.6 Presentation of Data-- -- -- -- -- -- -- 106

5.7 Data Analysis-- -- -- -- -- -- -- -- 107

5.8 Discussion of Findings -- -- -- -- -- -- -- 108

CHAPTER SIX: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary-- - -- -- -- -- -- -- --- 112

5.2 Conclusion-- -- -- -- -- -- -- -- -- 115

5.3 Recommendations-- -- -- -- -- -- -- 117

BIBLIOGRAPHY -- -- -- -- -- -- -- -- -- 120

APPENDICES-- -- -- -- -- -- -- -- -- 127

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LIST OF TABLES

Table 3.1 Installed Domestic Refining Capacity of Nigeria’s Refineries-- 59 Table 3.2: PMS Price Adjustments (2000 – 2007)-- -- -- -- 72 Table 3.3: Petroleum Products Prices Monitored Nationwide, Oct. – Nov., 2006-- -- -- -- -- -- -- 73 Table 3.4: Four Refineries and their Installed Capacity-- -- -- 74 Table 3.5: Shows Petroleum Products Depots and their Storage Capacities (All figures in M3)-- -- -- -- -- 75 Table 3.6: Short-Run Economy-Wide Effects of 10% Increase in Pump Prices of Petroleum Products-- -- -- -- -- 78

Table 4.1: Characteristics of Roads by Zones-- -- -- -- -- 81 Table 4.2: Summary of Transportation Basic Data, 2003 – 2007 by the National Bureau of Statistics-- -- -- -- -- 83 Table 4.3: Programme target and stage of implementation on the Works Ministry Budget Report (2005)-- -- -- -- 85 Table 4.4: The Schedule of Road Transport Fares-- -- -- -- 89 Table 4.5 and 4.6: Percentage increase/decrease in PMS Price Adjustment and Percentage distribution of GDP of the road transport sub-sector, 2003 – 2007 -- -- -- -- 90 Table 4.7: Correlation Analysis on Percentage Increase/Decrease in Fuel Pump Price and GDP on Road Transport-- -- -- 90 Table 5.1: Public Health Data, 2003 – 2007-- -- -- -- -- 103 Table 5.2: Demographics Characteristics of the Nigerian Health Sector-- 104 Table 5.3: Health and Economic Indicators for Nigeria vis-à-vis Selected African Countries-- -- -- -- -- -- 105 Table 5.4: Correlation Analysis of Percentage Increase/Decrease in Fuel Pump Price and GDP of the Health Sector-- -- -- 106 Table 5.6 Correlation Analysis of Percentage Increase/Decrease in Fuel Pump Price and GDP of the Health Sector--- -- -- 107

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LIST OF ABBREVIATIONS

ABUTH – Ahmadu Bello University Teaching Hospital

ASUU – Academic Staff Union of Universities

AGO – Automotive Gas Oil

BPD – Barrels Per Day

BPE – Bureau of Public Enterprises

CBN – Central Bank of Nigeria

CIA – Central Intelligence Agency

DALE – Disability Adjusted Life Expectancy

DPK – Dual Purpose Kerosene

DPR – Department of Petroleum Resources

FERMA – Federal Roads Maintenance Agency

FMH – Federal Ministry of Health

GDP – Gross Domestic Product

HRW – Human Rights Watch

IDH – Infectious Diseases Hospitals

IMR – Infant Mortality Rate

IPMAN – Independent Marketers Association of Nigeria

JUTH – Jos University Teaching Hospital

KRPC – Kaduna Refinery and Petrochemicals Company

LUBOAN – Luxury Bus Association of Nigeria

LUTH – Lagos University Teaching Hospital

MAN – Manufacturers Association of Nigeria

NACCIMA – Nigeria Chambers of Commerce, Industry, Mines and Agriculture.

NARTO – National Association of Road Transport Owners

NBS – National Bureau of Statistics

NHIS – National Health Insurance Scheme

NISER – Nigerian Institute of Social and Economic Research

NLC – Nigeria Labour Congress

NNOC – Nigerian National Oil Company

NNPC – Nigeria National Petroleum Corporation

NPRC – Nigerian Petroleum Refinery Company

NPRC – Nigerian Petroleum Regulatory Commission

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NUPENG – National Union of Petroleum and Natural Gas Workers

OPEC – Organisation of Petroleum Exporting Countries

PEF – Petroleum Equalisation Fund

PENGASSAN – Petroleum and Natural Gas Senior Staff Association of Nigeria

PHRC – Port Harcourt Refinery and Petrochemicals Company

PMS – Premium Motor Spirit

PPMC – Petroleum Products Marketing Company

PPPRA – Petroleum Products Pricing Regulatory Agency

PPPRC – Petroleum Products Pricing Regulatory Committee

SCRPPSD – Special Committee on the Review of Petroleum Products Supply and

Distribution

SECAN – Senior Staff Consultative Association of Nigeria.

SMOH – State Ministry of Health

TAM – Turn Around Maintenance

TCF – Trillion Cubic Feet

TDZ – Transport Differential Zones

UCH – University College Hospital

UITH – University of Illorin Teaching Hospital

UMTH – University of Maiduguri Teaching Hospital

UNDP – United Nations Development Programme

UNICEF – United Nations Children Education Fund

UNESCO – United Nations Education Scientific and Cultural Organisation

UNTH – University of Nigeria Teaching Hospital

UPTH – University of Port Harcourt Teaching Hospital

VAT – Value Added Tax

WHO – World Health Organisation

WRPC – Warri Refinery and Petrochemicals Company

1

CHAPTER ONE

1.0 Introduction

The modern state is a territorial society divided into government and

subjects claiming, within its allotted physical area, a supremacy over all other

institutions. It is therefore the final legal depository of the social will that sets the

perspective of all other organizations and brining within its power all forms of

human activity the control of which it deems desirable (Laski, 1925:21). The above

definition is all inclusive as its has spelt out a number of characteristics, including

territory, internal organization, population, diplomatic recognition, sovereignty and

domestic support. The state consists most broadly, of the means whereby

disputes are settled in the form of laws. In such countries as the United States,

Australia, Mexico, Nigeria and Brazil the term state also refers to political units,

not sovereign themselves, but subject to the authority of the larger state or federal

union.

The history of the Western state dates back to classical antiquity in ancient

Greece. Plato and Aristotle wrote of the polis, or city state, as an ideal form of

association, in which the whole community’s religious, cultural, political and

economic needs could be satisfied. The city state characterized primarily by its

self sufficiency was seen by Aristotle as a means of developing morality in the

human character. The Greeks were able to grant citizenship rights (in Athens) to

their citizens combined with a direct democratic form of government that was to

have a long after life in political thought. There were also large, quasi-

bureaucratized empires, like the Roman Empire, which depended more on the

effective military and legal organizations and the cohesion of an aristocracy. The

Roman republic was a legal system whose jurisdiction extended to all Roman

2

citizens securing their rights and determining their responsibilities. Rome

developed from monarchy into a republic, governed by a senate dominated by the

Roman aristocracy. The Roman political system contributed to the development of

law, constitutionalism and to the distinction of functions between the private and

the public spheres.

The evolution of the modern state typically began with the dissolution of the

Roman Empire. This led to the fragmentation of the imperial state into the hands

of private and decentralized lords whose political, judicial and military roles

corresponded to the organization of economic production. In the 16th century the

modern concept of the state emerged, in the writings of Niccolo Machiavelli and

Jean Bodin, as the centralizing force where stability might be regained. In the

Prince, Machiavelli gave prime importance to the durability of government,

sweeping aside all moral considerations and focusing instead on the strength –

the vitality, courage and independence of the ruler. For Bodin, - power was not

sufficient in itself to create a sovereign; the ruler must comply with morality to be

accepted and make his rule durable, it must have continuity i.e., a means of

establishing succession. Bodin’s theory was the forerunner of the 17th century

doctrine of the “divine right of kings”, whereby monarchy became the predominant

form of government in Europe. It also created a climate for the ideas of the 17th

century reformers like John Locke and Jean Jacques Rousseau, who began to re-

examine the origins and purposes of the state.

The state has continued to be categorized based on its various forms and

the mode of governance. Although generally speaking the term “state” refers to

the instruments of political power, it also refers to the way in which such

instruments can be accessed and obtained. The form of state identify its mode of

3

government, and the way in which the highest political office(s) are filled and their

relationship to the people that are being governed in the society. These forms of

rule such as monarchy which denotes rule by one, oligarchy – rule by minority,

republic – rule by law and democracy – rule by the majority have all been in

existence right from time. In the 20th century, forms of political and philosophical

thoughts continue to emerge ranging from anarchism, in which the state is

deemed unnecessary and even harmful in that it is operated by some form of

coercion, to the welfare state, in which the government is held to be responsible

for the survival of its members and guaranteeing subsistence to those lacking it.

The most general meaning of the term welfare is happiness, prosperity and

well being. It implies not mere physical survival, but some measure of health and

contentment as well. As a political principle, welfare has come to be associated

with a particular means of achieving general well-being: collectively provided

welfare, delivered by government through the mechanism of a so called welfare

state (Heywood, 2002: 413). According to Girvetz, the welfare state is the

institutional outcome of the assumption by a society of legal and therefore formal

and explicit responsibility for the basic well-being of all its members. Such a state

emerges when a society or its decision-making groups become convinced that the

welfare of the individual is too important to be left to custom or to informal

arrangements and private understandings and is therefore a concern of the

government. The key functions of a welfare state were in addition to the security

of lives and property, promotion of development and social welfare by providing

full employment, equal opportunity, social security and ensuring a minimum

standard of living for those at the bottom of the social ladder. The idea

materialized largely from the proposals of William H. Beveridge, popularly referred

4

to as the chief architect of the welfare state in Britain. The famous Beveridge

report of 1942 prescribed a framework for the provision of basic needs, and also

remedies for problems of disease, ignorance, squalor and idleness (Girvetz, 1972:

512 – 20).

Much of this thinking stemmed largely from the work of the British

economist J.M. Keynes. The Keynesian welfare model was tailored toward

pursuance of a policy of full employment through government intervention in the

economy. This was done to try to avoid the problems of unemployment

experienced in the great depression of the 1930’s. Where the free market failed to

prevent instability and high unemployment (the state would intervene by

employing more people in nationalized industries, government and welfare

services) and by increasing government spending to stimulate the economy. It

was assumed that the government could largely shape the performance of a

national economy through controls over things such as trade and the movement of

capital (Haralambos and Holborn, 2004: 562). According to Keynes (1936), the

somewhat comprehensive socialization of investment will prove the only means of

securing an approximation to full employment, though this need not exclude all

manner of compromises and of devises by which public authority will co-operate

with private initiative.

The provision of welfare is therefore a process in which the government

undertakes the main responsibility for providing for the social and economic

security of the state’s population by means of pensions, social security benefits,

free health care, and so forth (Carpenter, 1996: 56). These services have come to

be widely tagged as the ‘social safety net” which is a term used to describe a

collection of welfare services provided by the state, such as unemployment

5

benefit, healthcare, shelters, the minimum wage and sometimes subsidized

services such as public transport, and free education which can give the individual

a better chance of becoming a successful member of the society, rather than

being caught up in the hopelessness of extreme poverty.

In practical terms, development programmes and policies have thus come

to be associated with the notions of advancing the welfare state. However, welfare

policies do not just happen, they require an overall economic and development

policy which is consciously aimed at the broadest possible degree of social justice

and well being which requires planning by both the government and the private

sector (Ebenstein, 1969: 776). Planning therefore involves looking ahead and

anticipating the future, making choices from available alternative means to

achieve specific objectives and formulating programmes of action to attain those

objectives. It centres on an organized process of preparing a set of decisions for

future action directed at achieving desired goals. Planning is thus a projected

course of action geared towards an end. In the context of an underdeveloped

country like Nigeria, it is a tool geared towards economic and social development

(Obadan, 2003: 50).

Development in modern sense is a multi-dimensional process. According to

Todaro and Smith (2006:51), development in its essence must represent the

whole gamut of change by which an entire social system is tuned to the diverse

basic needs and desires of individuals and social groups within which that system,

moves away from a condition of life widely perceived as unsatisfactory, towards a

situation or condition of life regarded as materially and spiritually better. It can

therefore be conceived as involving major changes in social structures, popular

6

attitudes, national institutions, acceleration of economic growth, the reduction of

inequality and the eradication of poverty.

Development was always seen as an economic phenomenon. As a result

the explanations in terms of national productivity and output very seldom tried to

grapple with the issue in its totality, but rather concentrate attention narrowly on

factors of production and overall Gross National Product (GNP). Economic

theories were liberally used or employed to suggest modes that could be adopted

and implemented by third world countries for development especially for reversing

their marginal position in global economic relations. The recommendations which

gained wide currency in the political economy literature was that there should be

unrestrained international trade in which the participating countries concentrate on

and specialize in the economic activities in which they have comparative

advantage. Therefore international coalitions and negotiations, for enhancing the

benefits that can accrue to the less technologically/or industrially developed

countries (LTDC/or LIDC) in their economic and political interactions with the more

technologically or industrially developed countries (MTDC/ or MIDC) of the North

were based on the production of primary products by the LTDCs in exchange for

finished products (Ogbuagu, 1995:19). Although these factors are indeed relevant,

no mention was made of the way that the factors and social relations of production

combine to form a distinctive system or mode of production and the exploitation of

the majority of the people which according to Karl Marx is the main issue that

underlay all the historical epochs of development (Rodney, 1972:20). This view is

generally expressed in the dependency school of thought which has argued that

the root or existence of underdevelopment are the results of an exploitative

colonial system which continued in new guises even after the political

7

independence of the colonized areas and their manner of incorporation into the

world capitalist economy.

One important impulse for change in African economies and the less

technologically developed countries, LTDCs, is the desire of the leaders,

apparently shared by their followers, for development. The desire for development

might be described with equal accuracy as a passion or ideology. The informal

and formal pronouncements of these leaders give one the impression of an

unshakeable commitment to the idea that they must try to achieve development,

which is perceived as the primary condition for their own welfare (Ake, 1981:141).

Development in this sense must be able to have the following three objectives

which are first, to increase the availability and widen the distribution of basic life-

sustaining goods such as food, shelter, health and protection. Secondly, to raise

levels of living, in addition to higher incomes, the provision of more jobs, better

education, and greater attention to cultural and human values, all of which will

serve not only to enhance material well-being but also to generate greater

individual and national self-esteem. Thirdly, to expand the range of economic and

social choices available to individuals and nations by freeing them from servitude

and dependence not only in relation to other people and nation status but also to

the forces of ignorance and human misery (Todaro and Smith, 2006:57). It can

therefore be concluded that development is both a physical reality and a state of

mind in which society has, through some combination of social, economic and

institutional processes, secured the means for obtaining a better life and a state of

well being, which is usually associated with collectively provided welfare.

The rolling back of state involvement in welfare matters is viewed as

attempts by the government to hands off partly or wholly from its traditional role or

8

function of providing collective welfare to the people. The move toward rolling

back the state is greatly underpinned on the advocacy of Milton Friedman and his

Chicago School Movement. Known as the grand guru of the movement for

unfettered capitalism and the man credited with writing the rule book for the

contemporary, hyper mobile global economy. In one of his most influential essays,

Friedman articulated contemporary capitalism’s core tactical nostrum, known as

the “shock doctrine”. He observes that “only a crisis – actual or perceived

produces change”. When such crisis occurs, the actions that are taken depend on

the ideas that are lying around. For more than three decades, Friedman and his

powerful followers have been perfecting this very strategy: waiting for a major

crisis then selling off pieces of the state to private players while citizens were still

reeling from the shock then quickly making the “reforms” permanent. (Klein,

2007:6).

Friedman’s first major attempt to exploit a large-scale shock or crisis

situation was in the mid seventies, when he acted as adviser to the Chilean

dictator, General Augusto Pinochet. Not only were Chileans in a state of shock

following Pinochet’s violent coup, but the country was also traumatized by severe

hyper inflation. Friedman advised Pinochet to impose a rapid-fire transformation of

the economy through tax cuts, free trade, privatized services, cuts to social

spending and deregulation. It was the most extreme capitalist takeover as the

Chileans saw their public schools replaced with voucher funded ones. The shock

treatment was also applied during the floodwaters of New Orleans in the wake of

hurricane Katrina. Friedman’s radical idea was that instead of spending a portion

of the billions of dollars in reconstruction money on rebuilding and improving New

Orleans’ existing public school system, the government should provide families

9

with vouchers, which they could spend at private institutions run at a profit. The

same shock treatments have also been applied after the September 11, 2001

terrorist attacks in the U.S. as well as post war strategy after the invasion of Iraq

and the 2004 devastating tsunami in Sri-Lanka. These orchestrated raids on the

public sphere in the wake of catastrophic events, combined with the treatment of

disasters as existing market opportunities is what Noami Klein, (2007:6-7) has

referred to as “disaster capitalism”.

In Nigeria, the move is anchored on the provisions of the International

Monetary Fund IMF and World Bank conditionalities on poor underdeveloped

countries. The move began in 1986, with the adoption of the Structural Adjustment

Programme, SAP, by the Babangida administration. This led to the withdrawal of

government in providing certain critical services through its privatization and

commercialization programmes and removal of subsidies on other goods and

services provided to the people. The implication of this on the political economy of

Nigeria is that it has brought a deeper entrenchment or domination of global

imperialism. There has been the intensification of struggles over rents and more

specifically the attempt to re-order the rules under which the organizers of big

businesses and their allies would share the country’s wealth. This has intensified

the marginalization of the workers, the peasants and powerless groups in Nigeria.

There has been a near total displacement of industries and the crippling of local

capacity and initiative. The deepening contradictions rooted in the neo-liberal

economic programmes are deeply demonstrated in the growing collapse of social

infrastructures, the rise in the frequency and intensification of social conflicts and

insecurity, lack of basic services to the people and the widening gap between the

rich and the poor (ASUU Communiqué, 2008:30-31).

10

This research shall be focused on a certain aspect of rolling back the state

in Nigeria, which is on the deregulation of the downstream sector of the petroleum

industry. This is occasioned by government’s attempt to remove local subsidy

from the price of petroleum products which leads to increase in the price of

petroleum products. The government also insists that it must hand over the entire

downstream to private individuals, sell the refineries and allow market forces to fix

the price through competition.

1.1 Statement of Problem

The welfare state and state intervention in the economy in the twentieth

century was characterized by the promotion of the involvement of the state on

behalf of individuals to create the conditions that should allow the individuals

ability to maximize self interest and secure liberty and justice. Even in countries

like Nigeria that are not welfare states, it has come to be accepted that the state

must be involved in welfare of the people. However, the end of the cold war led to

the capitalist prescription of neo-liberal policies and the operation of the free

market economy which globally has led to rolling back the gains of the welfare

state and divestment of the state from welfare matters. The background to this is

the growing internationalization of the global economy, which has undermined the

autonomy of national governments, and has led to pressure to reduce wage costs

in order to attract highly mobile investment (Carpenter, 1996: 528).

In the current logic of liberal globalization and its attempt to liberalize,

privatize and universalize the markets, the concept of the welfare state and state

involvement in welfare matters have been seriously challenged in many parts of

the world and indeed, Africa. To elaborate further, governments in Africa and

11

Nigeria in particular no longer promote industrialization by deliberate policy

measures rather incentives are focused on production of primary commodities.

Nations are forced to give up the push for a more export oriented economy.

National ownership and the control of the economy continue to give way to

emphasis on incentives to foreign investment and privatization of state businesses

and their sale to foreign interest. This coupled with the policy reforms of the

Structural Adjustment Programmes (SAP) being foisted on the developing

countries by the World Bank and the International Monetary Fund (IMF) to

minimize the government interventionist role by reducing public ownership,

subsidies and regulation. The consequences of this on development is that

intentional or otherwise, social services have been very seriously and negatively

affected (Offiong, 2001:163).

Of recent, many government programmes and policies have been

subjected to serious criticisms by the press and well placed Nigerians. Cases

such as the deregulation of the downstream of the petroleum sector, the ongoing

privatization programme of the government, the contributory pension act scheme,

the monetization of fringe benefits in the public service with its attendant

consequence of right sizing and down sizing as well as efforts by the Obasanjo

administration to decentralize the Nigerian Labour Congress are illustrative of this

situation (Umofia, 2005: 171). All these are the various efforts adopted to roll back

state involvement in national economic activities in an era of economic

globalization.

Various countries react to and cope with globalization in different ways. In

Nigeria, public wealth is increasingly privatized, misappropriated and stolen to the

detriment of a majority of Nigerians thus aggravating the situation and making the

12

country more vulnerable to violence. There is less public funding for education

leading to more ignorance in the polity. The proportion of the annual federal

budget for education has been the lowest since the 1960’s. It has fallen from 8

percent in 2001 to 6 percent in 2003, 5 percent in 2004, 6 percent in 2005, 7

percent in 2006 and 8 percent in 2007 (NBS, 2007: 45). Other public infrastructure

that are indispensable for the development of the productive forces of the country

have been neglected. The situation has also led to the implementation of many

anti people policies which are detrimental to development. The retrenchment of

workers, non-payment, poor payment and late payment of workers, denial of

workers benefits, removal of subsidy on petroleum products leading to the

increase in the pump price of petroleum products, sale of the peoples’ property to

a few individuals especially to the rulers themselves and their agents under the

guise of privatization programme, describes the prevailing situation in Nigeria

(Ogban-lyam, 2005: 39).

Over the years the United States with its posture for liberal capitalism has

been championing the course for a free market economy with non-interference of

the government. The IMF and the World Bank in their conditionaliteis for doing

business with poor and underdeveloped countries have always advocated for

liberalization of trade and foreign exchange controls, reduction in the size of

government, particularly through major cutbacks in public expenditures which in

some cases include privatization and commercialization of a good number of

public enterprises; removal of government subsidies on goods and services, wage

freeze and price controls. Other related conditions include greater reliance on

market forces (that is, of demand and supply) in the economy (Ogbuagu, 1995:

111). However, the recent global financial crisis has called into question the notion

13

of non state interference and a free market economy. The crisis has altered the

global financial landscape in a profound way, and shifted power away from

unfettered markets to greater government interference (El-Eriam, 2008:21).

All over the world, there has been various government intervention efforts

through “bail out” plans to contain the crisis. The United States government

through its senate approved the sum of 700 billion dollars to cater for the interest

of its citizens who have invested in the capital market. The Nigerian government in

a bid to rescue the capital market had through the Nigerian Stock Exchange

(NSE) given approval to six banks to inject 600 billion naira into the troubled

capital market (Osundolire, 2008:1). This state of affairs is sufficient grounds to

seriously question the doctrine of rolling back the state as the path to a better

society.

Under a package of International Monetary Fund (IMF) endorsed reforms, it

is hoped that deregulated economic policies will attract investors into the oil and

gas sector and engender competition that will in turn lead to the growth of the

Nigerian economy. The policy has led to the removal of domestic fuel subsidy,

with the attendant increase in the pump prices of domestic petroleum products.

This has brought untold hardship and the continuous pauperization of the citizens.

Low prices of petroleum products which could have been one of few economic

benefits for the already impoverished Nigerians who see price increases as

another kickback to local-elite marketers, importers and foreign oil companies.

This has called into question the presumption that deregulation can necessarily

lead to the reduction of poverty and enhance economic growth and development.

Although the federal government’s plan to deregulate the petroleum sub

sector began on 1st January 2002, September 2003 marked the commencement

14

of full liberalization which has led to increase and adjustments in the pump prices

of petroleum products over the years. The government gave reasons for accepting

the full deregulation of the downstream of the petroleum industry. The decision

was announced by the Minister of Finance, Dr. Muhktar. He explained that this

was in line with the recommendation of the presidential committee on the global

economic crisis. According to him, the decision has been taken because it has

become clear that the huge amount of money being spent regularly by

government on subsidy was actually “a case of subsidizing inefficiencies in the

fuel supply and distribution network”. The minister said that monies expended on

subsidy could be channeled into developing the critical sectors of the economy

with the overall benefit to all Nigerians, particularly the masses. (Okereke, 2009:

1-2). Therefore government resources previously used for subsidizing petroleum

products will be freed to undertake more developmental projects and programmes

such as construction of good roads, clinics, hospitals, schools and provision of

good drinking water, etc, for the benefit of the general public and especially the

rural poor (Gbadamosi et al., 2008: 56). There is therefore, the need to evaluate

the success of this policy.

Accordingly, this research shall be guided by the following research

questions:

(1) Was there any significant positive relationship between the deregulation of

the down stream of the petroleum sector and the development of the road

transport sector of the Nigerian economy?

(2) Was there any significant positive relationship between the deregulation of

the downstream of the petroleum sector and the development of the public

health sector of the Nigerian economy?

15

1.2 Objectives of the Study

In carrying out this study, the broad objective of the study was to

understand the effects of rolling back the state on the political economy of Nigeria.

Its specific objectives were to:

(i) Examine the effect of handing over the provision of critical public services

to private enterprise;

(ii) Examine the impact of deregulation of the downstream of the petroleum

sector on the road transport sector within the period 2003 – 2007;

(iii) Examine the impact of public health sector of the Nigerian economy within

the period 2003–2007; and

(iv) Analyse the inevitable role of government to provide welfare, organize

development and regulate the economy.

1.3 Significance of the Study

Against the background of the forceful propagation of the efficiency and

superiority of the market forces by some multilateral institutions and the much

advocated merits of rolling back the state, there is need to find out what the

evidence is. This study is of immense importance in that it seeks to explore the

presumption that the free market system is supposed to be the solution to

economic problems of Nigeria and therefore the sure path to development.

International organizations notably, the International Monetary Fund (IMF),

World Bank and the World Trade Organization (WTO) have actively promoted the

empowerment of the market, a minimal role for the state, rapid trade and financial

liberalization as well as economic deregulation. The impression being created is

that under conditions of liberalization, the welfare state and welfarist state

16

activities should be rolled back and that the government has no role to play in

development planning and economic management. The research will enable us at

least know the gap between the ideology of superiority of market forces and the

practice, at least, in Nigeria.

1.4 Literature Review

There has been a lot of research which has been carried out on the subject

matter of deregulation of the downstream of the petroleum sector with the

proponents and opponents highlighting a list of factors for its merits and demerits.

However, in order to place the proposition of this study in proper focus, the

literature thus reviewed shall be aimed at answering the research question on

whether there is any significant positive relationship between the deregulation of

the downstream of the petroleum sector and the development of the road

transport and public health sectors of the Nigerian economy.

Nkoro (2005: 1) opines that deregulation has saddled the people with the

burden of the continuous increase in the cost of local consumed fuel. To him,

leaving the pricing at the mercy of market forces has led to a situation that

importers make abnormal profits at the expense of the country and it’s ordinary

citizens. He maintains that the effect of price hike has led to the worsening of the

economic crises which has affected the gross domestic product (GDP).

Accordingly, this inverse relationship can be attributed to labour unrest during fuel

price hike which consequently affects the revenue that would have accrued to the

coffers of government to be used in the provision of basic infrastructure in

hospitals, good roads and education.

17

Describing the situation that led to the establishment of the petroleum

(Special) trust fund (PTF) by the Abacha government, Anam-Ndu (1998: 142)

observes that following the new pricing of petroleum products introduced in 1994,

the resultant gain was put into a special account for investment for the benefit of

the Nigerian people. The PTF was established to manage the fund by timely

execution of carefully designed socio-economic projects to enhance the general

condition of living for all Nigerians in the shortest period possible. The fund was

instrumental to the construction of roads, building of hospitals and supply of drugs

to hospitals in various parts of the country. It is to be noted that even before the

abolition of the fund by the Obasanjo administration, the fund was widely criticized

on the issue of uneven spread in the execution of development projects across

the country.

Owens (2005:5) reacting to the government and civil society battle over

economic reforms, admits that the Nigerian economy is approaching paralysis. He

observes that though the government is dead set on implementing IMF endorsed

price reforms, which would raise fuel prices by eliminating subsidies. Yet the vast

majority of Nigerians adamantly oppose the move, claiming it would impoverish

them. Such price hikes has often frozen the entire sectors of the economy in the

grip of a general strike opposing the government plan to raise fuel prices. The

citizens view the reforms which are backed by the IMF as an attempt to increase

the pains of hardship as this will lead to an escalation in the cost of social services

such as health care and transportation.

In the same vein, Arosanyin (2006:56) on assessment of Nigeria’s

transportation sector on democracy, has pointed out that the chaotic transport

sector of the economy is a pointer to disenchantment about democratic

18

governance as seen in the numerous strike actions on the increments in the pump

price of petroleum products particularly premium motor spirit P.M.S. for vehicles.

Emeka Okafor in a critical overview of recent developments in the petroleum sub

sector in Nigeria maintains that although Nigeria is the sixth largest producer and

exporter of crude oil, this has not translated into a better living condition for the

masses. To him, subsidies which government always insists must be removed

has become a very contentious issue to the extent that whenever the pump prices

went up the labour union has often resorted to strikes sometimes involving violent

crises. This has cost the nation a great deal of man-hour or days lost in various

establishments as well as shutting down all sectors of the economy including the

medical sector. Patients are turned away from public hospitals. There are often

attendant loss of lives as a result of police brutality in the course of quelling the

riots (Okafor, 2007: 92).

Commenting on the position of labour in the plans to deregulate the

downstream sector of the Nigerian oil industry, Chigbo (2009: 15) expresses the

position of the Nigeria Labour Congress President, Abdulwaheed Omar and the

position of labour; that government has not put in place any serious measure to

cushion the spiral effects the policy would have on the people. This is moreso

when there is abject neglect of infrastructure and social amenities in the country.

The poor state of roads, health institutions, water, electricity does not encourage

the average Nigerian to support any move by government to remove subsidy

which he believes is the only thing he is benefiting from government’s inept

management of the nation’s affairs.

In his work on “The Impact of Oil on a Developing Country” (Ikein, 1990:

81-82) maintains that health facilities in Nigeria remain most spatially

19

disproportionate, a situation that poses the utmost disadvantage to rural residents.

The better funded and equipped health facilities are located in urban centres. He

observes that there is a dual health care system in which western scientific

medicine exists side by side with traditional health care systems, and is often in

direct competition with each other. Moreover, there is unequal access to Western

medicine as many people, particularly those in the rural areas and low income

group, rely on traditional herbal medicines since it is easier to acquire, and

herbalist are more accessible and affordable than doctors in the less populated

areas. This dualism in health care facilities has a significant impact on the

country’s morbidity. Statistics show that the infant mortality rate is 193 per 1000

for rural areas and 94 per 1000 for urban areas. The average ratio of physicians

per capita is one in 12,550 people while the average life expectancy was put at

48.6 years. However, this is based on a 1985 statistical survey which was

conducted by the then Federal Office of Statistics ( FOS ) in Nigeria.

In the same vein, he observes that although the oil revenue made it

possible for the government to embark on massive road construction after

independence, the building of roads was highly disproportionate; rural

infrastructure lagged behind intercity and intra-city constructions. There was little

or no attention given to road development in rural oil producing areas. He further

maintains that rural roads constitute 44% of available roads in the country but

receive minimal attention and maintenance, and during the rainy season, the

roads are hardly passable. Many rural areas are still inaccessible by road,

particularly in the riverine areas of the Niger Delta. The residents of these areas

rely heavily on waterways, some of which are not navigable in the dry season. It is

20

therefore difficult for the residents to transport goods and services to desired

markets (Ikein, 1990: 82-84).

Commenting on the “Crimes of globalization: Health care, HIV and the

poverty of neoliberalism in sub-Saharan Africa” Ifeanyi Ezeonu is of the view that

in rolling back state expenditure in such an important sector as the health care,

the few health care options available to the poor have become even more limited.

To him, the situation has been exacerbated by the requirements of the Uruguay

Round Trade-Related Investment Measures (TRIMS) which even advances the

neoliberal agenda further, and the Trade-Related Intellectual Property Rights

(TRIPS) agreements which limit the access of many Africans to manage health

crisis. (Ezeonu, 2008: 138). In the same vein, Ogunbekun et al (1999: 174) attest

to this claim that the persistently low quality and inadequacy of health services

provided in public facilities has made the private sector an unavoidable choice for

consumers of health care in Nigeria. Ineffective state regulation however has

meant little control over the clinical activities of private sector providers while the

cost of medical services has, in recent years been very expensive coupled with

the rate of inflation.

In his analysis of “Economic Liberalization, political Instability and State

Capacity in Venezuela”, Jonathan D. John maintains that double increase in the

price of gasoline which were passed on by private bus companies onto the

citizens, induced outbursts which led to its bloodiest urban riots. Though the

government had actually announced that bus fares were allowed to rise by 30

percent, it did not monitor the increases bus companies were charging. Moreover,

bus drivers ignored discounts to students. The riots which ensued were contained

21

by a relatively undisciplined military response that left more than 350 people dead

in two days (John, 2005: 114).

Describing the oil sector deregulation in India, the economic and political

weekly narrates that increase of petroleum product prices definitely counts as a

harsh measure in economic and political lexicon of any country (Economic and

Political Weekly, 2001:3199). Quartey (2004:4) also points out that in Ghana, the

petroleum price increases of about 100% in the first quarter of 2003 led to

increased demand of high wages which led to an increase in inflation.

Biodun Adedipe in the analysis of “the impact of oil on Nigeria’s economic

policy formulation” is of the view that the incessant crisis in supply of products

culminated in the decision by the government in 2003 to deregulate the

downstream sub-sector. However, the manner of its implementation has been

controversial because it ignores economic realities and the deplorable state of

infrastructure such as inadequate electricity and power generation, bad roods,

dilapidated schools and ill-equipped hospitals in Nigeria. He goes on to say that

policies designed to address the deficiencies and defects end up being poorly

articulated or implemented because of regional, political or rent-seeking selfish

interest. He maintains that, it is the same rent seekers that continually sabotage

the re-invigoration of the domestic refineries, making Nigeria to depend on

importation of refined products to meet domestic need (Adedipe, 2004:5).

Baker (2008:2) in observance of the World Bank and International

Monetary Fund Policy influence in Nigeria’s energy sector states that the

privatization process of the downstream of the oil and gas industry has seen

strong opposition from labour groups over the absence of due diligence. The

government is heavily criticized for its willingness to sell state assets without

22

ensuring the development of national refining capacity, which would eventually

remove the need to import much of the refined petroleum products that Nigeria

consumes. According to her, although the federal government spent a total of

$18.6 billion from 2000 – 2006 to import refined petroleum products, the oil

workers have said that the amount spent on the importation of refined products

could build at least six new refineries across the country and also lead to

employment generation. Employment leads to increase income which also leads

to improvement in living conditions such as good health care, housing and

transport. She further stated that the failure in developing the refining capacity

favours the few elites who benefit from the monopoly that they hold.

Looking back at the last general strike embarked upon by the Nigeria

labour Congress, the then president of the Organized Private Sector, Mazi Sam

Ohuabunwa in an interview observed that the economy suffered, losing billions of

naira to work free days. In the almost one week of strike, Nigeria lost huge sums

of wealth and money because the first two days were used to prepare for the

strike, while the other three days experienced no work at all. He maintains that a

major component of our GDP was wasted and the strike led to additional losses

and impoverishment of the people. During the period of strike, interest rates keeps

running on borrowed funds, liabilities to suppliers and all other stakeholders

including workers, are on during the period. For some companies, there was the

need to shut down their plants and to restart the plants meant a big cost

(Ohuabunwa, 2007:4).

The future remains bleak for the Nigerian economy even in the event of a

downward reduction in the price of petroleum products from N70 to N65, Oil and

gas workers still rejected the five naira reduction, which they described as

23

unacceptable and an attempt to deregulate. The national Union of petroleum and

natural gas Workers (NUPENG) and the Petroleum and Natural gas Senior Staff

Association of Nigeria (PENGASSAN) told the Federal Government in a meeting

convened to ward off impending industrial action in the oil sector, that the unions

see the new pump price as a back door approach to full deregulation. They claim

that government’s calculative route to imposing full deregulation of fuel products

pricing on Nigeria by hoodwinking with the temporary fluctuation of crude oil prices

was unacceptable to labour. Such moves to remove subsidies will disregard the

socio-economic consequences of full deregulation on living wage. They further

maintained that a situation where over 80% of the downstream oil marketers

depended on imports was a bad omen and irrational. They suggested that the

road to a successful deregulation must be based on local cost of production

instead of import parity. Government must take responsibility to establish

functional refineries to meet and exceed our local consumption (Ologun, 2009:1).

Commenting on the Nigerian economy under globalization and the

behaviour of the state, Abddul-Ganiyu Garba, is of the view that most of the

domestic policies such as market or auction determined exchange rates, shift to

indirect form of monetary policy, deregulation of interest rates, removal of

exchange control, increase in price of petroleum products and privatization tend to

be justified by the argument that they were necessary to attract inflow of

investment. He concludes that expectations that privatization, deregulation and

trade liberalization and so on would induce inflow of investment into Nigeria and

lead to economic growth lacks support in fact, logic or theory (Garba, 2004: 163).

From the survey of literature in this section, it can be seen that deregulation

of the downstream of the petroleum sector which is occasioned by increase in

24

pump prices of petroleum products has not really engendered the growth or

development of the Nigerian economy. Although the logic and propositions seem

to tally with impressionistic evidence, the point of departure is that it is not

documented with empirical evidence, this work attempts to gather systematic

evidence to substantiate these claims. The gap to be filled is to see how the claim

of development can be substantiated at least in the road transport and the public

health sectors of the economy.

1.5 Theoretical Framework

The adoption of deregulation and other economic reforms presuppose a

belief in the free market system, whose prototype is laissez-faire, the doctrine of

Adam Smith’s “invisible hand” which has been forcefully espoused by its

promoters, the World Bank and the IMF, in their recommended structural

economic reforms to developing countries.

However, for the purpose of an in-depth analysis, the theoretical disposition

adopted for this work shall be the social production theory which can be located in

Marxian methodology of dialectical materialism as espoused by Karl Marx and

Frederick Engels. In order to grasp the Marxian methodology we must bring in the

Marxian objective of study, which guided his choice of the relevant variables and

their ordering in his scheme. Marx was basically interested in laying bare the laws

of motion of the society. In other words, he wanted to find out the laws according

to which the society moves from one historical category to another. The

philosophy of Hegel had assigned the role of prime mover to ideas. According to

this reasoning, there are always certain ideas, called theses. The theses have

their antitheses or opposite ideas. A reaction takes place between these and

25

antitheses and the result is syntheses or new ideas, which attract their own

antitheses. Marx used a similar approach, but instead of assigning ideas the role

of prime movers, he came to rest on the material conditions of social life.

In Marxian system, social production necessitates the creation of

corresponding social production relations and these relations take various forms.

Their nature is not fixed, but changes with the degree of the development of the

social productive forces. The economic structure of the society is nothing but a

correspondence to these production or (social production) relations. These may

be collectively called the mode of production. According to Marx, the mode of

production in material life determines the general character of the social, political

and spiritual processes of life. It is not the consciousness of men that determines

their existence, but on the contrary, their social existence determines their

consciousness (Bhatia, 1981: 280).

Though one would have expected that the mode of production and the

superstructure to be in harmony with each other, the social production relations

imply the concomitant exchange and distribution patterns also. Since the

production relations are based upon property relationships, therefore the

exchange and distribution patterns also follow suit. Also when a new set of

property relations come into being, a corresponding superstructure (which

conforms with the mode of production comes into being. but the very evolutionary

process brings the mode of production and the superstructure into conflict with

each other. A process is set into motion by which the existing mode of production

will eventually be replaced by a new one and there will be a new superstructure in

harmony with the mode of production.

26

Dialectical materialism is concerned with the analysis of the fundamental

relations of matter in motion. It is the science of the conditions and forms under

which the various human societies have produced and exchanged and on this

basis have distributed their products. Mankind is considered to be the highest

stage of material development. As with nature itself, so human development is

subjected to dialectical processes of development. Dialectical materialism is

sometimes seen as the complement of historical materialism (the materialist

conception of history) which is the name given to Marx’s methodology in the study

of society, economics and history. Dialectical materialism makes reference to the

claim by Marx that the history of all hitherto existing societies since written history

is that of class struggles. The motion of any given society is to be understood in

terms of the character of the contradictions of its constituent social elements. At

certain stages, and of necessity, quantitative changes occur in a given order

which result in such heightened social contradictions that a new, qualitatively

higher, stage of social development results (Whitefield, 1996: 139).

The members of the society enter into social relationships with each other

for the purpose of social production. These social relationships are to begin within

productive powers of the society. But it is the very increased productive power of

the society which brings it into conflict with the social relationships. The social

relationships, instead of being a help to the productive powers of the society,

become fetters upon them and have to be cast off for further progress. It is in this

sense that Marx brings in the famous class conflict in terms of which the

movement of social history is traced. Whenever a new mode of production comes

into being, the society finds its productive powers enhanced at the same time, a

new social relation brings benefit (compared with the earlier situation) to the

27

hitherto oppressed classes (for example, slaves become serfs or serfs become

wage labourers). But the new social relationships in due course, bring to the

notice of the society the fact that some classes are getting exploited by others

(Bhatia, 1981: 281).

The mode of production which was highly studied by Marx with detailed

analysis is the capitalist mode. Capitalism can be seen as a system based on

generalized commodity production, in which exist private ownership or control of

the means of production. According to Marx, the driving motive and determinant

purpose of capitalist production is the self-valorization of capital to the greatest

possible extent, i.e. the greatest possible production of surplus value, hence the

greatest possible exploitation of labour-power by the capitalist. As the number of

co-operating workers increases, so too does their resistance to the domination of

capital, and necessarily, the pressure put on by capital to overcome this

resistance. The control exercised by the capitalist is not only a special function

arising from the nature of the social labour process, and peculiar to that process,

but is the same time a function of the exploitation of a social labour process, which

is consequently conditioned by the unavoidable antagonisms between the

exploiter and the raw materials of his exploitation. The subjection of labour to

capital is therefore seen as a formal result of the fact that the worker, instead of

working for himself, works for, and consequently under the capitalist. Through the

cooperation of numerous wage labourers, the command of capital develops into a

requirement for carrying on the labour process itself, into a real condition of

production. That a capitalist should command in the field of production is now as

indispensable as that a general should command on the field of battle (Marx,

1976: 448-9).

28

As concerns the application of the framework to suite this study, it must be

established that capitalism is a global economic system as well as a system of

social production. It is observed that from the period of colonial rule till date the

capitalist social production system introduced into Nigeria has been geared

towards serving the needs of a minority of Nigerians against the pre-colonial

communal social production system. The occupation of the land by the colonialist

lasted for well over half a century. Thus began a journey and struggles of the

various subjugated people to regain their freedom and rule themselves. The

struggles over the years which were sometimes violent led to the termination of

direct foreign rule. Since the end of colonialism in October, 1960, the country has

been under indirect foreign rule through the Nigerian rulers, who the colonizer

groomed and left behind to run the capitalist system. This mode of production has

continued to serve essentially the few who directly control it and the Europeans

and American who indirectly control it. The struggles have thus continued till date,

sometimes violently, as manifested in anti-petroleum products price increase and

anti international monetary fund and World Bank conditionality demonstrations

protest and riots (Ogban-Iyam, 2005: 29).

The crisis which has resulted from the deregulation of the downstream of

the petroleum sub-sector is underpinned by the successive imposition of

unworkable, IMF economic and social policies since 1986. Deregulation of the

petroleum sub-sector has brought untold hardship on Nigerians as the cost of the

three critical forms of energy – petrol, diesel and kerosene has been increased

several times and sometimes deceptively by the government.

There has been continued protest by the Nigerian masses, who see the

attempt at price increase as leading to further impoverishment of the people while

29

generating kick back into the pockets of local elites and the coffers of foreign oil

companies, who continue to sabotage the efforts to establish functional refineries

in the country, so that they might obtain licenses to import petroleum products.

The government is justifying its actions on the basis that it is spending heavily to

import fuel products into the country, and that it has to remove subsidy to use in

developing other sectors of the economy. Another reason for this decision include

the allegation that the petroleum subsidy scheme has been characterized by

inefficiency and corruption as well as the allegation that huge amounts allocated

to reviving the refineries have not produced desired results. Clearly, part of the

responsibility of government is to ensure that its policies and programmes are

efficiently run and that corruption is checked. The government seeks to sell off the

refineries on this count rather than taking concrete steps to ensure that they are

efficiently run. However, the government has failed to prosecute the offenders for

mismanaging the funds which has been earmarked for turn-around maintenance

in the refineries. It is a well known fact that turn around maintenance activities are

being frustrated in these refineries so that they will not be functioning at optimum

capacity to allow for continued fuel importation.

It must be noted that attempts and efforts at rolling back the state welfare

programmes which is occasioned by the various neo-liberal policies of the World

Bank and the IMF are meant to under develop the people. The various policies

such as liberalization of trade, monetization, deregulation of the economy,

privatization and commercialization which are forced down on less developed

countries are nothing else but attempts at capitalist expansion and exploitation.

These policies which benefit only the few elites at the expense of the masses are

30

meant to subjugate the already impoverished people and keep them in check for

their continued exploitation.

On the impact on transport sector the deregulation of the downstream of

the petroleum sector allows the unregulated private sector owned road

transportation system which helps in providing freight and passenger services to

increase the cost of transport fares anytime an increase in the pump price of

petroleum products is announced. An increase in the cost of transport fares

translates into increase in the prices of goods and services which ultimately

results in inflation.

The implication for the health sector is that neoliberal policies such as

structural adjustment programmes has altered the level and nature of state

involvement in the health care system. Since the policies generally entail a

reduction in government involvement especially in spending, and a reduced role

for the state in the provision of many goods and services. There is lower health

expenditures with deleterious effects on the health status of the population,

particularly the poor. This has led to low quality and inadequacy of health care

services provided in public hospitals which in turn has made the private sector an

unavoidable choice for those seeking for health care in Nigeria. The fees charged

in private hospitals are expensive and affordable to the rich, with some of them

traveling abroad for medical care while the poor are forced to patronize patent

medicines stores, quack doctors and sometimes resort to the use of herbs whose

quality is yet to be ascertained for health care.

31

1.6 Hypothesis

1) There exist a significant positive relationship between the deregulation of

the downstream of the petroleum sector and the development of the road

transport sector of the Nigerian economy.

2) There exist a significant positive relationship between the deregulation of

the downstream of the petroleum sector and the development of the public

health sector of the Nigerian economy.

1.7 Methodology

1.7.1 Research Design

The research design adopted for this study is the Time Series Design with

the conventional notation system of X and O. X refers to the experiment

(independent variable). The independent variable here constitutes deregulation of

the downstream of the petroleum sub sector. While O refers to an observation on

the dependent variable. The dependent variables in which observation is made is

on the road transport and the public health sectors of the Nigerian economy.

O1,2,3……. Refers to the time order of observation, the subscript indicates the

order of observation before and after the experiments. The scope of the period

after the experiments is limited to 2003 – 2007, while the order of observation

entails the examination of the effects of deregulation on the provision of better

amenities and social conditions such as good roads for transportation and

provision of infrastructure and equipments in hospitals for improved health care

delivery.

The system employs the Time Series Design denoted by O1 O2 O3 O4 X O5

O6 O7 O8 (Leege and Francis, 1974: 87). The design despite its lack of a control

group controls for a wide variety of sources of internal invalidity. It may be used in

32

conjunction with laboratory experiments, surveys or aggregate data. It calls for a

lengthy series of repeated measurements before or after a presumed causal even

occurs. The fact that a lengthy pattern of performance is available makes this

design far more useful. Depending on the nature of the substantive problem and

the data employed, sources of external invalidity may or may not constitute a

threat. For example, if one seeks to generalize about changes in pump prices of

petroleum products as its affects the road transport and health sectors of the

Nigerian economy from 2003 – 2007, most sources of external invalidity would be

irrelevant. However, if one wanted to generalize findings from one state to the

entire country, then greater attention would need to be paid to these threats. The

principal threats to the design are history and to some extent, instrumentation and

the interaction of testing and X.

1.7.2 Population of Study

For this study on effects of deregulation of the downstream of the

petroleum sector on road transport and public health sectors of the economy 2003

– 2007, our population of study consists as follows:

(i) On the increase and adjustment in pump prices of petroleum products, it

comprised of the totality of the various decisions made by government on

this issue in the period 2003 – 2007. The number of times is 8

(ii) On the sale of infrastructure and refineries. The population consists of:

4 refineries

24 pumping stations

22 storage depots

5 jetties and

2 marine vessels

33

(iii) On the variation in the pump price of products. The population consists of

the totality of the various prices at which petroleum products were sold

between the periods 2003 to 2007.

(iv) On the number of roads constructed or rehabilitated the population consists

of all major roads from each of the geo political zones handled by the

federal government.

(v) On the rate or increase in fares, the population consists of the schedule or

statistics of fares charged on various inter city routes by a mass transit

company.

(vi) On the provision of infrastructure to support health care, the population

consists of the total number of teaching hospitals by the federal

government for hospitals that have been earmarked for equipment

provision and infrastructure. Total number is 8.

(vii) On the provision of capital expenditure on the roads and health sectors, the

population consists of all the budgetary estimates for capital expenditure

on roads and health sectors from 2003 to 2007.

1.7.3 Sampling Procedure and Selection

On the issue of increase and adjustment in pump prices of petroleum

products the entire population was studied. Total number is eight.

On the sale of refineries, pumping stations, storage depots jetties and

marine vessels, elements were selected using the random sampling technique.

On the member of roads constructed or either rehabilitated, the study

adopted purposive or judgemental sampling to select at least six major federal

highways from the six geo political zones in the country.

34

On the issue of road transport fares charged within this period a schedule

of fares on inter city routes we took a random sample from major transport

companies and statistics of road transport fares on various intercity routes.

On the provision of infrastructures in hospital for health care delivery, a

random sampling was adopted in the study of at least 4 out of the 8 teaching

hospitals earmarked by the federal government for improvement of infrastructure.

On the capital budget provisions for the road and health sectors of the

economy the entire budgetary provision was studied from the period 2003 – 2007.

1.7.4 Method of Data Collection

For the purpose of this study, the researcher adopted the observation of

statistical records; interview method was also used where the investigator

completed a schedule of enquiry with responses from respondent(s). There was

a direct observation of the phenomena while the documentary aspect of the

research relied heavily on the use of written documents such as books, record

keeping activities of government agencies, private institutes, the internet, learned

journals, newspapers and magazines.

1.7.5 Method of Data Analysis

Certain statistical methods like tables, simple percentages, mean tests,

averages and the range were used in analyzing the data generated from the

records on the impact of the deregulation of the down stream of the petroleum sub

sector on the road transport and health sectors of the economy. Correlation

analysis was used to establish if there was a significant positive relationship or

otherwise between the percentage increase or decrease in the pump price of

35

petroleum products and percentage of gross domestic products in the road

transport and public health sectors of the economy within the period 2003 - 2007 .

1.8 Clarification of Concepts and Terms

For the purpose of keeping the theme of this study in proper focus. It was

necessary to explicate on the following concepts and terms.

Rolling back the state

This refers to efforts or attempts to limit or make the government to

withdraw partially or totally from its traditional role of meeting certain basic needs,

conditions and/or creating infrastructure to enhance the welfare of its citizens. A

good way of doing this or limiting the role of the state is through the

implementation of the IMF, World Bank and WTO economic reform packages and

conditionalities prescribed to the less developed countries often dubbed as

structural adjustment programmes (SAP). These packages have been the drivers

of economic globalization and are being foisted on the poor and technologically

underdeveloped countries of Africa, Asia and South America. This processes of

rolling back the state are not limited to the third world, they are being applied in

Britain and the United States, at least before the so-called economic meltdown.

Prominent in Nigeria in the retreat of the state are the dominance of market

forces, trade liberalization, privatization and commercialization of public

enterprises, currency devaluation, reforms in the public services such as

monetization which results in the retrenchment and rationalization of the work

forces, and deregulation of the economy. In practical and operational terms it

means reducing the participation of the state in the economy. In other words, the

prevailing mood of the state is to reduce the size of government funding and

36

management of most of the economic activities which it had hitherto acquired for

itself (Ogbuagu, 1995: 154). Advocates of these reform policies argue that it is a

combination of measures aimed at promoting economic efficiency and long term

growth with stabilization policies designed to restore balance of payments

equilibrium and price stability (Okongwu, 1987: 4).

Deregulation

This is a process by which governments remove, reduce or simplify

restrictions on business and individuals, often ostensibly with the intent of

encouraging the operation of private enterprise by market forces, but also with the

intention of opening new areas of trade for speculators. It is the removal of some

governments’ controls over a market. The practice is generally supported by right-

leaning politicians and neo-liberal economists, and businesses, but heavily

criticized by others such as community activists and the anti globalization

movement who charge that the removal of regulations can lead to negative

outcomes such as removed protections for worker and consumers, ecological

damage and anti-competitive practices by large market players unrestrained by

regulation. The stated rationale for deregulation is often that fewer and simpler

regulations will lead to a raised level of competitiveness, therefore higher

productivity, more efficiency and lower prices overall.

In Nigeria deregulation has been applied on foreign exchange rates, the

capital market and so on. But for the purpose of this study, the focus on

deregulation shall be on the down stream of the petroleum sub sector. This can be

seen in the removal of subsidy on domestic petroleum products, such as the

prices of petrol, kerosene and diesel. This leads to increase in the price of these

37

products, which also leads to rise in the cost of living and consequently, public

protests.

Monetization

Monetization refers to the conversion into money those fringe benefits in

which the government provides for the welfare of the workers in their conditions of

service. It mostly has to do with abolishing the age-long practice of providing basic

amenities to public servants by the government. These amenities include

residential accommodation, transport facilities, medical services, and utilities such

as electricity, telephone and water. The policy was introduced in Nigeria as part of

the public sector reform measures of the Olusegun Obasanjo’s administration.

The implementation started with political office holders, including ministers and

members of the national assembly. The policy was subsequently extended, first to

the core civil service. The policy has also been extended to the component states

of Nigeria.

According to the government, the implementation of the policy became

necessary because over the years, the cost of governance has escalated arising

mainly from the burden of providing basic amenities to public servants by the

government. Individual pay cheques of workers in the civil service were to include

all monetized benefits such as housing, transportation, medical services, furniture

allowance and utilities such as water and telephone (Umofia, 2003: 411). Apart

from the retrenchment of the workforce especially drivers, it was widely argued

that the increased income coming to the hands of the public servant will be used

by the civil servant to adequately plan for his welfare and ensure a good standard

of living.

38

In Nigeria, like many other poor countries, public service reforms have

largely been an integral part of the neo-colonial policies of the erstwhile colonial

masters through the instrumentality of the World Bank and the IMF. The

implementation of the policy of monetization in the Nigerian public service

commenced in 2003, with a view to minimizing waste and enhancing the welfare

of worker through monetized benefits. This policy has no doubt generated a lot of

issues and controversies in the wake of its implementation. Experts of are of the

view that the policy must be reviewed and equity followed in its implementation in

order to ensure that the policy meets its objectives to the nation and the workers.

(Vambe, 2008: 22).

Privatization and Commercialization

Privatization is the process of ceding ownership of business from the public

sector (government) to the private sector. It is the implementation of a decision to

sell companies owned by the state to private individuals or groups. While

commercialization refers to the operation of public enterprises on profit making

basis as is normally the case in the private sector.

According to Ogbuagu (1995:154-5), Public involvement in the economy

usually takes three major forms, each of which can be subjected to privatization.

These are financing, production and regulation. Public financing refers to

government’s involvement in providing funds for the production of certain goods

and services. This could take several forms. First, government may decide to

hands off from the development and provision of a particular product(s). Such

function or responsibility could be passed to the private sector while government

may continue to retain regulatory function. Second, it may decide to be directly

involved in full or part production of some goods and services. Third, it may

39

choose to completely leave these activities for the private sector but retain a

regulatory function in order to ensure that the activities meet required standards.

Privatization may take various forms. These include share issue

privatization – through the selling of shares in the stock market and asset sale

privatization – selling the entire firm or part of it to a core or strategic investor,

usually by bidding or auction. Privatization, in effect, thus involves the partial or

total transfer of public companies into private ownership. This, therefore, means

the transfer (by sale) of a part of, or the entire equity of a public owned

organization such that the control of the public institution changes from

government or any of its agencies into private hands.

Proponents of privatization believe that private market factors can more

efficiently deliver many goods and services than government due to free market

competition. In Nigeria the dilemma over the Federal governments privatization

and commercialization exercise borders on the questionable sale and

concessioning of the public enterprises and assets. The hue and cry over the

exercise stems from the fact that the sale of pubic enterprises has only been to a

few well placed individuals who hijacked the process at the detriment of the

citizens. Also, there have been public outcry that the enterprises were sold at give

away prices which can largely be traced to another fact that the sale,

concessioning and transfer of the enterprises were in the main neither based on,

nor backed by any credible and appropriate technical valuation (Ikedianya,

2008:1).

Downstream of the Petroleum Sector

The petroleum industry is usually divided into two major components parts:

the upstream and the downstream. The upstream is associated with oil

40

exploration and drilling. The down stream of the oil sector is a term commonly

used to refer to the refining of crude oil and the selling and distribution of products

derived from refined crude. The downstream of the industry includes refineries,

petrochemical plants, petroleum product distribution, retail outlets and natural gas

distribution companies. It reaches the consumers through products such as petrol,

diesel, jet fuel, kerosene, asphalt, lubricants, synthetic rubber, plastics, fertilizers,

antifreeze, pesticides, pharmaceuticals and propane.

In order for crude oil to be synthesized into usable products, it must first be

processed. At oil refineries, the crude oil that has been transported via pipelines

from upstream operations is converted into usable forms. The downstream sector

of the petroleum industry is therefore the part of the industry that is responsible for

final processing, product distribution and marketing. It is also where supply meets

demand and where customers meet companies. All retail outlets such as petrol

stations are included in the downstream sector of the industry. Downstream also

includes marketing, customer service and strategic planning for the sale and

distribution of finished products.

Capitalist Mode of Production

In the writings of Karl Marx and the Marxist theory of historical materialism,

a mode of production simply means the way of producing. This is made up of the

combination of the productive forces with the social and technical relations of

production. The productive forces include human labour power and the means of

production (e.g. tool, equipment, machines, buildings and technologies, materials

and land). While the social and technical relations of production include the

property, power and control relations governing society’s productive assets, often

codified in law, co-operative work relations and forms of association, relations

41

between people and the objects of their work, and the relations between social

classes.

According to Marx, the combination of productive forces and relations of

production means that the way people relate to the physical world and the way

people relate to each other socially are bound up together in specific and

necessary ways. People must consume to survive, but to consume they must

produce, and in producing they necessarily enter relations which exist

independently of their will. For Marx, the whole secret of why and how a social

order exists and causes social change must be discovered in the specific mode of

production that a society has. He argued further that the mode of production

substantively shaped the nature of the mode of distribution, mode of circulation

and the mode of consumption, all of which together constitute the economic

sphere. To understand the way wealth is distributed and consumed, it is

necessary to understand the conditions under which it is produced.

The capitalist mode of production therefore refers to the socio-economic

base of capitalist society. It is characterized by the predominance of private

ownership of the means of production, distribution and exchange in a mainly

market economy. The owners of capital are the dominant capitalist class

(bourgeoisie). The working class (proletariat) are those who do not own capital

and the means of production but must live by selling their labour power in

exchange for a wage. What is important here is not necessarily Marx’s

characterization of how the one mode of production supersedes the other and end

ultimately in communism but centrality of more or less the struggle over the

control and distribution of what is produced. As long as a few control and/or own

what is produced, so long the majority will continue to be at the receiving end of

42

the production process. This dynamics is still at the heart of the globalization

process. It is also seen daily in the upheavals in Nigeria political economy.

Transport Sector

Transportation is a system for carrying or moving persons or goods, from

one place to another. Transportation is an essential part of human activity, and in

many ways forms the basis of all socio-economic interactions. A good transport

system is essential to support economic growth and development. Transport

statistics are grouped into four basic categories, namely, rail, road, water and air

transport. Road transport is the most commonly used mode of transportation in

Nigeria today. Road transport accounts for more than 90% per cent of the sub-

sectors contribution to the Gross Domestic Product. The activities on the sector

involve the conveyance of passengers en-masse or in small numbers, the

transportation of animals, farm produce and merchandise.

Health Sector

The health sector is charged with the responsibility of providing medical

services to patients or sick people to ensure or enhance their state of physical and

mental well being. The government has a very important role to play in this sector

by providing infrastructure, facilities and drugs. It also includes preventive,

curative and rehabilitative care. This is done through the building and equipping of

hospitals, health centres, provision of drugs, training of medical and health

personnel such as doctors, nurses and midwives.

43

CHAPTER TWO

DEREGULATION: CONCEPTS AND THE BASIC THEMES

2.0 Meaning and History

The role of the state in the economy has always been a controversial issue

in public debate. In the last two decades, the debate has become particularly

heated due to the upsurge in neoliberal thinking. This stems from the advocacy on

the virtues of unregulated markets, thereby recommending deregulation, opening

up and privatization. This has led to the argument by many neoliberal scholars

that human nature and indeed the nature of modern political institutions are such

that the more constrained the state is the better for the economy. This push for a

minimal, pro-business state coupled with the rise of globalization sees the nation

state at best as an anachronism and at worst as an obstacle to human progress

(Chang, 2004:1).

Heywood (2007:5), refers to Neoliberalism as an updated version of

classical political economy. The central pillars of neoliberalism are the market and

the individual. The principal neoliberal goal is to ‘roll back the frontiers of the

state’, by minimizing the intervention of the state in the economy, in the believe

that unregulated market capitalism will deliver efficiency, growth and widespread

prosperity.

Deregulation is a process by which rules or regulations are weakened,

reduced or removed. It simply refers to the removal of government controls from

an industry or sector, to allow for a free and efficient marketplace. This is usually

enacted to create more competition within the industry. This means that

government rules and regulation governing the operations of the system are

relaxed or held constant in order for the system to decide its own optimum level

44

through the forces of demand and supply. It therefore allows enterprises and

services to be restricted as little as possible and can be seen in the withdrawal of

government controls in the allocation of resources and the production of goods

and services.

The deregulation approach, adopts a laissez faire stance towards the state,

assuming that the best economic development is to minimize governmental

involvement. The state is seen as a force whose proper role is limited to providing

the legal framework and social environment for private economic activity. Growth

is believed to be facilitated by minimizing governmental regulation, especially over

decisions as to what to produce and how (Liecht and Jenkins, 1994: 257).

Deregulation gained momentum in the 1970’s, influenced mostly by

research at the University of Chicago School of Economics, the theories Fredrick

Von Hayek, Ludwig Von Mises, Alfred E. Kahn among others, but more

importantly that of Milton Friedman. It could be recalled that the first experiment

with neoliberal state formation can be traced to Chile after the Pinochet’s coup on

the 11th of September 1973. The coup, against the democratically elected

government of Salvador Allende, was promoted by domestic business elites

threatened by Allende’s drive towards socialism. It was backed by US

corporations, the CIA and the US Secretary of State, Henry Kissinger. It violently

repressed all the social movements and political opposition (Harvey, 2005:7). This

was seen by many as arising from the advocacy of Milton Friedman who then

served as economic adviser to the Chilean dictator. Friedman’s advise to Pinochet

was that a rapid economic transformation was through privatised services, tax

cuts, free trade, reduction in social spending and deregulation.

45

2.1 Forms of Deregulation

According to Menard and Ghertman (2009:173), deregulation can take

many forms. These include; deregulation of market entry or exit, deregulation of

price control, deregulation can also be complete or partial.

(i) Deregulation of market entry or exit

As part of competition and industrial policies, government may decide

whether to allow for free market entry of firms or regulate market access.

Sometimes it is through the granting or auctioning of licenses. Government can

also choose to decide the mode of competition between domestic and foreign

firms. The decision between free and regulated entry and about the number of

licenses to be granted are substantially affected by the government’s endeavour

to interfere with trade according to its own interest (Upmann and Stahler,

2003:26).

(ii) Deregulation of price control:

Government may sometimes decide to handoff from imposing the price of

certain goods and services. Price control are governmental impositions on the

prices charged for goods and services in marketing usually intended to maintain

the affordability of staple foods and goods to prevent price escalating during

shortages. There are two primary forms of price control, the price ceiling, the

maximum price that can be charged and a price floor, the minimum that can be

charged. Control hold out the promise of protecting groups that are particularly

hard pressed to meet price increases.

General prize controls on many goods are often imposed when the public

becomes alarmed that inflation is out of control. The reason most economist are

skeptical about price controls is that they distort allocation of resources since

46

controls prevent the price system from rationing the available supply (Ruckoff,

2008:4).

(iii) Complete and partial deregulation

Deregulation might be seen as the complete or partial elimination of

regulation in a sector with the intent of improving performance. Partial

deregulation therefore means that the process of deregulation is not completed. It

might not be completed because regulators are still in the process of deregulating

or because they might choose to open up to competition only a part of the

regulated sector (Menard and Ghertman, 2009:173). This therefore means that

government has not opened the sector for total deregulation, it might still be

controlling some aspects.

2.2 Objectives of Deregulation

The proponents of deregulation have been canvassing for years that the

purpose of deregulation is to benefit consumers. It is generally agreed that the

central purpose of industry restructuring or deregulation is to provide consumers

with lower prices, more choices, and improved services. According to Penn

(2000:54), this goal serves as the appropriate standard for measuring the

performance of deregulation.

From the Report of the Technical Committee on Privatisation and

Commercialisation, the intention to deregulate the public sector was borne out of

the following objectives:

(a) To restructure and rationalize the public sector in order to lessen the

dominance of unproductive investment in the sector

47

(b) Re-orientate the enterprises for privatization and commercialization

towards a new horizon of performance improvement, viability and overall

efficiency.

(c) Ensure positive returns on public sector investments in commercialized

enterprises

(d) Check the present absolute dependence on the treasury, for funding the

otherwise commercial oriented parastatals and encourage their approach

to the capital market, and

(e) Initiate the process of gradual release to the private sector of such public

enterprises, which by their nature and type of operations are best

performed by the private sector (TCPC, 1988/89).

According to Izibili and Fidelis (2007:230), the objectives enumerated

above have been geared towards meeting some specific goals such as the

improvement in the management, minimization of government interference,

efficiency and performance of public enterprises, reduction in the financial burden

of government, increase in the funding of infrastructure and other facilities. Others

include enhanced economic growth and development, installment of market

discipline, capital market developments and popular capitalism through

widespread ownership of corporate shares.

2.3 The Policy of Deregulation in Nigeria

In the developing countries, many radical neoliberal reforms have been

carried out since mid 1980’s. These reforms were implemented sometimes

voluntarily but often under pressure from multilateral agencies like the IMF, World

Bank, the World Trade Organisation and donor agencies. What is notable is that

48

over time, the scope and magnitude of such external intervention have been

constantly widening, with serious implications for national sovereignty and the

mandate of multi-lateral institutions.

Deregulation is a reality in Nigeria today as a direct result of successive

thrusts from the private sector which in turn have influenced government policy of

deregulating major sectors of the economy over the years. The present policy

contrasts with the erstwhile nationalistic policies enforced in the 70’s and early

80’s which greatly restricted the infusion of foreign capital into the economy

(Akinrele, 2002:2). This has led to the opening up of an economic sector to private

sector participation and capital inflow. In Nigeria deregulation has been

successfully implemented in the broadcasting, telecommunications and in the

airline sectors. This has not been without resistance and controversy in the

downstream of the petroleum sector.

According to Anderson (1979) public policy can be seen as a purposive

course of action followed by an actor or set of actors in dealing with a problem or

matter of (social) concern. A breakdown of this definition shows that public policy

consists of a behavioural pattern or courses and patterns of action by

governmental officials in the case of public policy. In his view, public policy can be

seen as a pattern of action extending over time and involving many decisions,

some routine and some not routine. From the foregoing point of view, public policy

can be seen as proposed preferences of government in written or unwritten form

to guide definite line of actions and behavior in relation to certain sphere of activity

which is aimed at solving a specific problem or matter .

Therefore the debate as to whether the policy of deregulation has actually

been operational in the downstream of the Nigerian oil sector can be observed

49

through a pattern of actions by the government through the incessant increases

and adjustment in the pump price of petroleum products. On September 30, 2003

the Federal Government came up with the policy of total deregulation of the

subsector of the petroleum industry. Before this period, the NNPC was getting a

daily allocation of crude oil from the Federal government at concessionary rates,

first at 9 dollars per barrel and later 18 dollars per barrel regardless of the

prevailing international oil prices (Saratu and Ononokpono, 2008:4). This was

preceded by the establishment of a government agency the Petroleum Products

Pricing Regulatory Agency by an Act of the National Assembly in May 2003. The

Board was established in June 19, 2003 with Chief Rasheed Gbadamosi as the

chairman.

Unfortunately, the policy of deregulating the downstream of the Nigerian oil

sector has not been a popular one. The policy has not gained wide currency and

general acceptance by the masses. To the masses, the policy is meant to serve

the interest of the few and rich while leading to the continued pauperization of the

majority of the people. This can be captured from the advocacy of the Elite Theory

on public policy. According to the elite theory (“elitism”), public policy is no more

than a reflection of the values and preferences of a governing elite, so that it is not

the people or the “masses” who determine public policy through their demands

and actions; rather, public policy is decided by a ruling elite and carried into effect

by public officials and agencies. The most outstanding proponents of the elitist

theory are Robert Michels, Vilfredo Pareto and Gaetano Mosca. However,

Thomas Dye and Harmon Zeigler in The Irony of Democracy as cited in (Eminue,

2005) provide an excellent summary of the elite theory which we quote hereunder

in extenso:

50

(i) Society is divided into the few who have power and the many who do

not. Only a small number of persons allocate values for society; the

masses do not decide public policy.

(ii) The few who govern are not typical of the masses who are governed.

Elites are drawn disproportionately from the upper socioeconomic

strata of society.

(iii) The movement of non-elites to elite positions must be slow and

continuous, to maintain stability and avoid revolution. Only non-elites

who have accepted the basic elite consensus can be admitted to

governing circles.

(iv) Elites share a consensus on the basic values of the social system and

the preservation of the system. In the United States, the elite

consensus includes private enterprise, private property, limited

government, and individual liberty.

(v) Public policy does not reflect the demands of the masses but rather the

prevailing values of the elite. Changes in public policy will be

incremental rather than revolutionary. Incremental changes permit

responses to events that threaten a social system with a minimum of

alternation of dislocation of the system.

(vi) Active elites are subject to relatively little direct influence from apathetic

masses. Elites influence masses more than masses influence elites

(Dye and Zeigler, 1970:6).

The elite theory, by thus focusing on the role of leadership in policy

formulation, emphasizes the fact that “in any political system, a few govern the

many.” It is necessary to emphasize the point that public policy is the product and

51

handiwork of the elites, reflecting their values and preferences and serving their

ends, one of which might not necessarily be the desire to provide for the welfare

of the masses (Eminue, 2005:256-257).

Cognitively, it could be asserted that a careful attempt at deregulating the

Nigerian economy came with the Ibrahim Babangida’s policy thrust of August

1986 with the introduction of Structural Adjustment Programme. However, the

second coming of President Olusegun Obasanjo, brought full vitality to a holistic

reform drive taking cognizance of all aspects of the national, including the

severely abused and usually volatile oil sector. Following in the footsteps of its

predecessor, the administration of Umar Musa Yar’adua came to the irrevocable

decision of deregulating the downstream of the petroleum subsector as a way of

freeing the downstream sector from the regulation previously imposed on it by

government through its monopoly; the Nigeria National Petroleum Corporation

(Oladele, 2009:12).

2.4 Benefits of Deregulation

Proponents of deregulation argue that it holds the key to the growth and

development in various sectors of the economy. In Nigeria, it has been canvassed

that deregulation will lead to sustainability and profitability in the oil and gas

sector. The benefits of deregulation are numerous. Scholars have argued that

deregulation, will:

(i) Yield more revenue for the country citing experience from the

telecommunications sector

(ii) Make Nigeria the hub of supply and distribution of petroleum products in

West Africa

52

(iii) Bring in new players as this will induce competition and improve

operational efficiency among players

(iv) Promote competitive prices of products which will be of immense

advantage to the consumer who will be treated as the king.

(v) Promote investments, leading to a vibrant industry thereby creating new

jobs.

(vi) Ensure that marketers expand their product reception and storage

facilities as this will guarantee product availability and stability.

(vii) Pull in a great deal of capacity and manpower, and thereby enhance

poverty alleviation and employment of the people.

(viii) Encourage the establishment of more refineries

(ix) Offer opportunities for viable cross border trade while ensuring foreign

exchange earnings for Nigerian companies.

(x) Promote gas consumption and encourage product exportation.

(xi) Stabilize product supply and ensure macroeconomic growth, as well as

(xii) Ensure greater transfer of technology and technological expertise, with

its multiplier effect on other sectors of the economy (Kayode, 2008:10).

It has been believed that the above benefits truly abound for the nation if

only fuel deregulation could be given the opportunity like it has been done in other

sectors of the economy such as aviation and telecommunications. The reform

program in the petroleum sector is fraught with enormous challenges. Besides

government’s efforts at full deregulation have not also yielded expected fruits. This

may be ascribed specifically to extraneous factors like non-acceptability of the

principles of deregulation by some groups of Nigerians, as well as the stiff

opposition mounted by the Nigeria Labour Congress and other civil society groups

53

persistently refusing the argument about the supposed benefits of deregulation

(Oluleye, 2009:2). The labour unions and civil society groups have consistently

rejected deregulation of the downstream of petroleum subsector, according to

them it will lead to a hike in the pump price of fuel products which in turn will lead

to a hike in the cost of social services.

2.5 Deregulation and Development

The definition of the concept of development has not only been very

problematic but elusive. There are myriads of opinions on what should constitute

the operational definition of the subject matter. The diverse views are however

reflections of the various aspects of the concept (Abba and Anazodo, 2006).

Development as a concept is multi-dimensional given by a number of definitions

from various scholars. Development implies a condition of gradual growth to

become bigger, more advanced or stronger. On the other hand it could be used to

denote a change to a critical or bad condition. To Olewe (1995) development

means growth or change. To him development when prefixed or suffixed applies

to diverse perspectives such as social development, economic development,

political development or socio-political economic development. According to Nnoli

(1979:2), development can be seen in the list of technical artefacts such as good

road network, electricity supply, educational institutions and hospitals, among

others. The World Bank sees development as “a sustainable increase in living

standards that encompass material consumption, education and health care

(World Bank, 1991:31).

There is a consensus on the core values or basic components which

should serve as a conceptual basis and practical guideline for understanding the

54

inner meaning of development. These components are seen as sustenance, self-

esteem and freedom. They represent the common goals sought by individuals and

societies. They relate to fundamental human needs of food, health and safety. To

this extent, we may safely assert that is a sin qua non for the improvement in the

quality of life of the people (Abba and Anazodo, 2006).

Therefore, the underlying tenets of development in the developing

countries was targeted at providing social benefits. The desire to break the yoke

of poverty, underdevelopment and to equitably distribute the benefits of growth

and industrialization has over the years made many developing countries,

particularly African countries, to adopt regimes of increasing state intervention and

presence of public enterprises. Indeed, the massive presence of public enterprise

was seen as providing the desirable healing balm to the wounds of poverty and

underdevelopment (Ozughalu, 2005:331).

By the 1990’s a series of events served to reshape the understanding of

development. Foremost among these was the fact that capitalism assumed global

dimensions which, abetted by information technology, diminished the regulatory

capacity of national and international institutions. While the benefits of global

capitalism fovoured the advanced countries, industralised nations actually halted

the expansion of their social provisions. In the United Kingdom and the United

States, conservative national leaders announced a freeze on their welfare states

and subsequently neoliberal leaders actually began the process of rolling them

back. States such as New Zealand announced early cuts in social welfare while

Europe, seen as the standard bearer of the welfare state began to reassess its

commitment to social programmes with Sweden which was seen as the paragon

55

of welfare states having a rethink on its comprehensive array of government social

provisions and programmes (Stoesz et al., 1999:243).

The belief in the efficacy of deregulation as an instrument of development

has led many nations to imbibe the policy in many government industries.

Although the regulatory policies had been rationalized largely as a way of

guaranteeing service to the public by industries having the character of public

utilities and as a means of protecting the public from monopoly pricing practices,

including the destructive competition that was said to lead to the creation of

monopolies. However, the government claims that the agencies had instead or as

well sheltered the regulated industries from competition and thereby helping to

foster costly inefficiencies (Derthic and Quirck, 1985:5).

It becomes morally, socially and economically worrisome if one takes a

critical look at the ostensible reason being brandished for privatization and

deregulation namely that public enterprises are not efficient. The fact remains that

privatization and deregulation have been fuelled by corruption. This, in the opinion

of scholars, is that the public enterprises are deliberately made inefficient so that

they could be sold out as willed; most often, to themselves who are still in

government. This according to Izibili and Aiya (2007:232) in no small way,

increases the mass poverty of our already impoverished people since it makes

access to basic facilities and resources impossible and unaffordable to the people.

Consequently, increased demand is being made on the Nigerian people to pay for

various services in different forms either through direct cost increment or simply

through complete or partial abandonment of these services by government in

such areas as education, health care delivery, transportation, postal services and

telecommunication.

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2.6 Deregulation and the Nigerian Economy

On the whole it can be argued that apart from the success stories recorded

in the broadcasting, telecommunications and to some extent the air transport

subsector, the various reform carried out in the petroleum subsector through

deregulation have not impacted positively in the Nigerian economy. The decision

of the Federal government to deregulate the downstream of the petroleum sector

has encountered serious opposition. The organized labour as well as Nigerians

and civil society groups have over the years been kicking against the policy which

they interpret as another name for fuel price hike, which they insist, would, given

the circumstances of most citizens, amount to a death sentence.

At a time when most nations of the world are pulling back from the realms

of market fundamentalism and are adopting measures to protect their economies

and citizens, the Nigerian government is allowing itself to be goaded and

stampeded into adopting ideologically driven policies that will in the long run wreck

the welfare of Nigerians and the economy’s capacity to compete (Odah, 2000:1).

From the introduction of the SAP in the mid-80’s and other reform packages until

the present, this has not impacted positively on the growth of the economies of

underdeveloped countries and indeed has not helped the economy of Nigeria in

any significant measure (Anugwom, 2007:121). Government withdrawal from

social provisioning has only succeeded in leaving the people more ravaged by

hunger, poverty and diseases. The state must therefore assume primary

responsibility for the welfare of its citizens. This responsibility in theory and

practice ought to be comprehensive, because all aspects of welfare are

considered universally by many citizens as rights which must be guaranteed by

the state.

57

It has been observed that with the prevailing global financial crisis which

has broken and altered the myth of market fundamentalism, that there must be

greater government interference in the economy. This has been rightly observed

by Obadan (2003:46), that in the light of the observed limitation of the free market

system, the so called invisible hand of the market must receive assistance from

the visible hand of government. This, therefore, means that there must be a

deliberate planning effort of the government geared towards strengthening and

regulating the market system in the quest for accelerated development. Thus, the

government has a duty to intervene in economic activities failing which the market

may lead to a misallocation of present and future resources, or to other

consequences that may not be in the long interest of the society. Very importantly,

government cannot, and should not assume a mere passive role in the process of

development for market forces, by themselves, cannot overcome the deep seated

structural rigidities in the economies of developing countries which include

Nigeria.

The very essence of growth and development in any economy is the

provision of social goods and welfare benefits to the people, but in the neoliberal

era, market orthodoxy is redefining the object and essence of social welfare

services including its patterns of allocation. The arguments are that the theoretical

and underlying assumptions of the neo-liberal reforms in the social welfare sector

according to Adejumobi (2000:32) are tenuos and these reforms are likely to

provoke complex, but mostly deleterious effects on both the population and also

inhibit national development. This is because the development process and

policies should consider and be continuously informed by local interest, effects

and reactions.

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2.7 Reregulation and Regulation

Reregulation refers to a situation when new or additional regulations are

enacted after an industry or sector is deregulated. The term also refers to the

process of reversing deregulation in a situation where deregulation turns out to be

impractical or unmanageable (see www.vortex.com accessed on 6/5/2011).

Regulation on the other hand is defined as state intervention in private spheres of

activity to promote the public interest or realize public purposes. Both terms are

frequently associated with what is called “market failure” – a situation in which the

market i.e. the forces of demand and supply fails to produce goods and services

at appropriate prices. Existing markets may be regarded as failures for reasons

other than the high prizes charged by a dominant firm. Consumers may conclude

that products are unsafe or that production processes have hazardous side effects

(Francis, 1993:2).

Regulation can also be made to protect consumers from health and other

risks as distinguished from economic regulation to protect consumers from high

prices and price discrimination. This kind of regulation is usually described as

social regulation. However, a major justification for regulation is market failure.

From the perspective of political analysis, market failure means politically

significant dismay with specific market outcomes. Unsatisfactory outcomes may

mean that a needed product or service is now too expensive for many consumers

to afford, or that a product is in short supply in comparison with public demand.

These conditions suggest the existence of a monopoly in which the monopolist

may clear greater income by setting the products price at a higher level producing

fewer than would be expected in a competitive market (Francis, 1993:10).

59

Although market failure is often at the centre of regulation, justifications for

regulatory intervention may be far more diverse. There exist four commonly

employed and, in many cases, linked arguments for regulation as identified below.

First, much regulation today is advanced as reducing risks to the health and safety

of workers, of consumers, and of the public within and, increasingly, outside the

borders of a nation. Second, a good deal of regulation is defended on moral

grounds, such as appeals to the importance of truth in claims made by the

manufacturer of a product, fairness in setting prices, or justice in the provision of

services to the least well-off. Third, regulation is often justified on the grounds that

it sets reasonable limits, charts the middle course between prohibiting an activity

and leaving it unfettered. Fourth and finally, regulation is often sought to provide

stability of equilibrium in an area of endeavour that has experienced unsettling

changes, such as found in the challenge of new technologies or the rise of new

competitors (Francis, 1993:10-11).

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CHAPTER THREE

DEREGULATION OF THE DOWNSTREAM OF THE PETROLEUM SECTOR

3.0 Introduction

Petroleum products have become indispensable for human sustenance

and industrial production world wide. In the specific context of Nigeria, the

petroleum industry assumes a special importance as ninety percent of the

country’s foreign exchange earnings comes from this sector while about 65% of

Federal Government’s income is derived from the sector. In addition, its down-

stream operations currently contribute as much as 20% of GDP such that it

considerably impacts on other aspects of the economy.

The issue of petroleum products pricing has always been very sensitive in

Nigeria that it ought to be carefully and tactfully handled. The effect of petroleum

products price increases is easily felt because of the low income of the people and

poor infrastructural development especially in transportation communication

system and electric power systems.

3.1 Background to Deregulation of the Downstream of the Petroleum

Sector

3.1.1 Petroleum Products Processing and Distribution and the State of the

Refineries

Nigeria became an oil producing country over five decades ago when the

first oil well was discovered at Oloibiri in 1956. Today Nigeria ranks as the sixth

largest oil producing country in the world with approximately 2 million barrels of

crude per day (bpd) production. One of Nigeria’s crude oil variants, the Bonny

light, ranks among the best in the world (Gbadamosi, 2001:91). As at today,

Nigeria has the tenth largest proven reserves of crude oil in the world (36.220

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billion), other higher producers being Saudi Arabia (262.300 billion), Canada

(179.210 billion), Iran (136.270 billion), Iraq (115.000 billion), Kuwait (101.500

billion), United Arab Emirates (97.800 billion), Venezuela (80.012 billion), Russia

(60.000 billion) and Libya (41.464 billion). In natural gas, too, Nigeria has the

seventh largest reserves in the world (181.900 tcf). Nigeria’s gas potentials are

thrice that of oil and some believe that it is more than is commonly reported

(Gbadamosi, et al., 2007:92).

In spite of this resource, Nigeria is the 17th poorest country in the world,

spends close to $1 billion on importing refined petroleum products a year.

Between 1995 and 2001, Nigeria spent N526 billion ($4.7 billion) on importing

refined petroleum products. Records have it that $280 billion oil revenue has been

spent to import 19 billion barrels of oil between 1964–2000 (Gbadamosi, 2001:91-

2). This is due to the low level of crude processed domestically which is also

attributable to the underperformance of the nation’s refineries. Nigeria has four oil

refineries with a total installed refining capacity of 445,000 bpd. These are Port

Harcourt Refinery and Petrochemicals Company, consisting of the old Port

Harcourt Refinery (Port Harcourt I), built in 1965 with a refining capacity of

60,000bpd and Port Harcourt Refinery II, built in 1989, with a 150,000bpd refining

capacity. The others are Warri Refinery and Petrochemicals Company, built in

1978 with a total refining capacity of 125,000bpd; and Kaduna Refinery and

Petrochemicals Company, built in 1980, with a total refining capacity of 110,000

bpd. Table 2.1 gives a breakdown of the installed capacity of the nation’s four

refineries and the optimum capacity achieved.

Over the years, government became heavily involved in the local fuel

market and regulated it for the benefit of the entire citizens. But due to negligence

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the local refining industry became characterized by low capacity utilization, gross

mismanagement, excessive unit operating cost and bloated over-heads,

intolerable process losses, low productivity, sabotage and inadequate

technological input for necessary product and process upgrade. These factors

combined to move the industry in a direction opposite to the progressive march of

the rest of the world. This led to the shortages of product and has escalated

despite increases in prices of products. As a result of the negligence, the

combined refining capacity of the refineries as at year 2000 was put at 93000 bpd

and as at 2007 had fallen to a mere 45000 bpd out of the initially installed capacity

of 445,000 bpd ( Nwanze,2007: 52 )

Table 3.1 Installed Domestic Refining Capacity of Nigeria’s Refineries. S/N Refinery Installed Capacity Optimum Capacity

Achieved (bpd) 1 PHRC 210,000 190,000

2 WRPC 125,000 100,000

3 KRPC 110,000 70,000

Total 445,000 360,000

Source: Nigeria National Petroleum Company (NNPC)

According to Gbadamosi et al. (2007:150), going by the more conservative

estimates of the nation’s daily requirements of oil, the total installed capacity of the

four refineries would have been sufficient to meet about 60 per cent of domestic

demand had the refineries been working at full capacity. The poor performance of

the refineries has been due to funding and lead-time required for the repair of the

necessary facilities. Capacity utilization and stream days efficiency have declined

to below 20 percent which calls for intervention (see Report of SCRPPSD,

2000:20).

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In addition to the poor state of the nation’s refineries, the distribution and

storage infrastructure has also been a source of problem. The same neglect and

lack of maintenance that destroyed the refineries also applied to the petroleum

pipeline network. Most of the nation’s over 5,000km of pipeline network linking

refineries and storage depots need replacement. Many of the pipelines are as old

as twenty to twenty-five years and the problem is further compounded by

widespread vandalism of crude oil and refined products pipeline.

The storage depots also experience similar problems of old age and

inadequate maintenance, resulting in leakages and a general inadequacy of the

facilities to meet the nations needs. Even at the retail end of the market, storage

tanks, road tankers and filling station pumps suffer from insufficient maintenance

and lack of new investments. What this illustrates is the country’s inability to meet

its citizens’ demand for petroleum products domestically even though it is a major

exporter of oil.

According to Edmund Daukoru, a former Group Managing Director of the

Nigeria National Petroleum Company and Former Minister of Energy as cited in

Soyode (2001:87), revealed that the problems of the industry arose principally

from the cumulative neglect of many years that cannot be remedied immediately.

The criminal neglect of the refineries by government officials refusal to carry out

Turn Around Maintenance (TAM) of the refineries resulted in their inability to

achieve the total installed refining capacity. For example, the TAM carried out on

Port Harcourt and Warri refineries in 1994, and that of Kaduna, carried out in

1992, was never satisfactorily concluded and the one started in 1998 was still

uncompleted at the end of 2000. Whereas TAM in refineries ought to last 30 days

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and should take place every 24 months, some of the refineries have not had turn

around maintenance for six years.

Historically, major petroleum marketing companies were the main sources

of petroleum product’s supply. The companies transported and distributed the

products relying on their distribution and retail outlets. This was an era of

deregulation in which Nigerians paid market-determined prices for products. Prior

to 1973, seven (7) marketing companies controlled marketing and distribution of

the products. The exchange rates were then relatively stable thus allowing for

planning on the part of major petroleum marketing companies to source products

from imports. However, this arrangement was not sustainable given that it was

dependent on the profit and market imperatives of the oil marketers, that included

Shell BP, Mobil, Agip, Esso and Total. The rate of consumption of petroleum

products soon exceeded the capacity of Nigerian Petroleum Refinery Company

Ltd, owned by Shell BP, to deliver products to the economy. Above all, the

arrangement was import-dependent. Global cost inflation in 1973 undermined the

capacity of marketing companies to deliver imported products at affordable prices.

The country’s economic activities expanded in the seventies such that Private

companies could no longer cope with increased demand for products. This

resulted in erratic supply of petrol and kerosene and ultimately acute scarcity of

the product. The shortage was endemic and created social and economic

dislocation in the country. This market-failure made government to venture into

petroleum products marketing and distribution. The concern by government to

overcome this lack of policy and total dependency on oil Companies led to policy

shift towards regulation. Government therefore introduced uniform pricing, after

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constructing a 3000km pipeline distribution network linking all the refineries

(Report of the SCRPPSD, 2000: 85-86).

Thus, before 1971, the Nigerian government was involved in the oil industry

mainly through business deals on concessions to the foreign firms in operation.

The government financial involvement was limited to the imposition of taxes and

royalties on oil companies. In May 1971, government created the Nigeria National

Oil Company, which later became the Nigerian National Petroleum Corporation,

following its desire to join the Organization of Petroleum Exporting Countries.

OPEC encouraged every would-be member to acquire a majority participation in

the operations of the oil companies and become actively involved in its own oil

sector. At this time, the oil companies dominated Nigeria’s products marketing.

Prices were market determined with regional price differences arising from

differences in transport cost. In other words, prior to this time, the downstream

sector of the oil industry was deregulated, only that the term had not been in

currency then (Gbadamosi et al., 2007:152).

In keeping with the OPEC decision, the Nigerian government acquired an

average of 60 per cent participating interest in the operations of the oil companies

in 1973. In the same year, government introduced uniform pricing of petroleum

products throughout the country. Moreover, to arrest possible disparity in

transportation cost arising from products distribution, government established a

management board for the Petroleum Equalization Fund. The Fund was

established by Decree 9 of 1975 as amended by Decree 32 of 1989 to ensure

uniform pricing system of petroleum products throughout the country. The fund

gets its resources from an inbuilt cost of N1.50/litre that is included in the pump

price irrespective of where the product is sold. The law requires that the fund

66

should reimburse oil-marketing companies for any loss sustained by them, solely

and exclusively, as a result of the sale of petroleum products at uniform prices

throughout the country. The PEF operates a Transport Differential Zones based

on 21 depot offices. There are two reimbursable elements in the PEF operations –

Equalisation when petroleum products are trucked within the same zone and

Bridging when petroleum products are transported across zones. However,

uniform pricing has been effective only in limited locations (SCRPPSD, 2000:16).

The various investments made by government on oil infrastructure and the

roles assigned to the NNPC and its Petroleum Pipeline and Marketing Company

PPMC subsidiary effectively led to government dominance of the storage

distribution and transportation. The four refineries and petrochemical plants, the

import jetties (Apapa, Atlas Cove, Escravos, Okirika and Calabar), the pipeline

network and the wholesale storage depots that receive refined products from the

refineries are all dominated by the NNPC. The major exception was at the retail

end of the market involving the operations of filling stations and delivery to

businesses by road tankers. This segment of the downstream sector was, until the

recent opening of NNPC filling stations, wholly dominated by the private sector

operators comprising of the major and independent marketers. The crucial

implication of state control of the sector was that the same mismanagement,

inefficiency and lack-lustre performance that characterized its involvement in other

areas of the economy also featured in the downstream of the petroleum sector.

Equally important is that state control also bred corruption in the system as it

easily allowed those in government as well as their cronies to have access to

refined products which they could easily sell to black marketers or smuggle to the

neigbouring countries (H.R.W., 1999:1).

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3.2 The Special Committee on the Review of Petroleum Products Supply

and Distribution

In June 2000, the Federal Government increased the price of Premium

Motor Spirit, Dual Purpose Kerosene and Automotive Gas Oil. This was

immediately followed by a nationwide strike action by the Nigeria Labour

Congress NLC. Thereafter, there was a dialogue with the NLC and arising from

this, the Federal Government in August 2000 set up a 34-man Special Committee

on the Review of Petroleum Products Supply and Distribution. The committee had

the mandate to look at the entire spectrum of the downstream of the oil industry. It

had as its term of reference:

(a) to review all aspects of petroleum products supply and distribution in the

entire economy;

(b) to recommend a structure of petroleum products supply and distribution to

be developed over the next financial year, which is self financing and

sustainable;

(c) to recommend a structure characterized by absence of monopoly and

freedom of several competing marketers to import and export products

while encouraging private ownership of refineries;

(d) to recommend “phased reforms and price adjustments which will achieve

the necessary self financing and sustainable system and prevent the

trauma and economic disruption usually associated with adjustment to

petroleum pricing”;

(e) to recommend a programme of consultation and public enlightenment to

facilitate the smooth implementation of the necessary reforms; and

68

(f) to recommend any other measures which the committee may deem

necessary or appropriate in the circumstances. (see Report of the

SCRPPSD, 2000: i-xv)

Working mainly through four sub-committees, namely, Supply and

Distribution, Cost Structure, Gas and Petrochemical, Communication and Public

Enlightenment Sub-committees, the SCRPPSD worked day and night, traversing

the entire country in order to have a first hand assessment of the capabilities and

problems of the downstream infrastructure and operations. At the end of its work,

the committee submitted a report to government in which it made the following

recommendations that:

(i) the NNPC must ensure the steady supply and distribution of petroleum

products to completely eliminate scarcity;

(ii) government must simultaneously carryout the rehabilitation of the

refineries, depots and pipeline distribution system to ensure adequate

and steady supply of products;

(iii) Rehabilitate and modernize the petroleum products import and

reception facilities;

(iv) A new National Petroleum Policy should be formulated and agreed

upon by all stakeholders before the end of 2000;

(v) A Nigerian Petroleum Act should be passed by the National Assembly

before April 2001;

(vi) The Nigerian Petroleum Regulatory Commission to be provided for

under the suggested Nigerian petroleum act should be promulgated to

come into effect between April and June 2001;

69

(vii) The current Department of Petroleum Resources should form the

nucleus of the new NPRC and should be granted autonomy and a

guaranteed source of funding;

(viii) The NNPC should be given financial and managerial autonomy to

enable it perform professionally and effectively. A contract between

government, labour and NNPC should prescribe milestones for

achieving total rehabilitation of all the local refineries, failing which the

NNPC management should be replaced; (see Report of the SCRPPSD,

2000:110 – 111).

3.3 Petroleum Products Pricing Regulatory Committee

Government accepted all the recommendations and issued a White Paper

on 22 March 2001 in which it affirmed a phased deregulation of the petroleum

downstream sector. Based on the recommendation of vi above, on 28 March

2001, government followed through on its plan by inaugurating the Petroleum

Products Pricing Regulatory Committee. The committee was made up of

representatives of all the major actors in the sector including government

agencies that have direct dealing with the sector. Some of the organizations

represented in the committee include: Major marketers, Independent Marketers

Association of Nigeria, National Association of Road Transport Owners,

Manufacturers Association of Nigeria, Petroleum and Natural Gas Senior Staff

Association of Nigeria, Luxury Bus Owners Association of Nigeria, Nigeria

Chambers of Commerce, Industry, Mines and Agriculture, Senior Staff

Consultative Association of Nigeria, National Union of Petroleum and Natural Gas

Workers, Nigeria Labour Congress, The Presidency, Department of Petroleum

70

Resources, Federal Office of Statistics, Central Bank of Nigeria, Ministries of

Transport, Labour and Finance (Gbadamosi, 2003:93).

Its terms of reference were to:

(1) Establish an information data bank through liaison with all relevant

agencies both nationally and internationally with a view to facilitating the

making of informed and realistic decision on pricing policies;

(2) Moderate volatility in petroleum products prices, while ensuring reasonable

return to operators;

(3) Maintenance of constant surveillance over key indices relevant to pricing

policy and periodically approve benchmark prices for all products;

(4) Identify microeconomic factors with relationship to prices of petroleum

products and advise government on all appropriate strategies for dealing

with them;

(5) Establish parameters and codes of conduct for all operators in the

downstream sector of the petroleum industry;

(6) Establish firm linkages with the key segments of the society and ensure

that its decision enjoys the widest possible understanding and support;

(7) Oversee the implementation of the White Paper on the report of the Special

Committee on the Review of the Petroleum Products Supply and

Distribution as they relate to its functions, taking cognizance of the phasing

of the specific proposals (Gbadamosi et al., 2007:199).

The PPPRC had many urgent assignments to carry out, but the most

pressing one was first to propagate the idea of deregulation throughout the

country for people to accept it. Because of the vigour with which the committee on

behalf of the government pursued it, most segments of the public opposed it as a

71

result of the incessant increases in the prices of petroleum products. This

opposition mounted with the labour movement leading. Strikes followed and

tension rose in the land. But, rather than back down in the face of opposition,

government injected more power into the programme. The government mandated

the Federal Ministry of Information to use its various public enlightenment organs

to disseminate widely the findings of the Report of the Special Committee. It also

set up a Presidential Technical Campaign Team on the Liberalisation of the Oil

Sector, headed by Engr. Funsho Kupolokun, the then Special Assistant to the

President on Petroleum matters (Gbadamosi et al., 2007:201).

3.4 Petroleum Products Pricing Regulatory Agency (PPPRA)

In May 2003, the National Assembly passed the Act to formally establish

the PPPRA. Consequently, President Olusegun Obasanjo inaugurated the board

of the Agency on 19 June 2003, followed by the appointment of a substantive

Executive Secretary on 26 June 2003. Government decided the leadership of and

composition of the Agency by reappointing Chief Rasheed Gbadamosi from the

PPPRC to be the chairman of the new PPPRA Board while most of the

stakeholders of the former PPPRC were also reappointed, including Dr. Oluwole

Oluleye who became the substantive Executive Secretary. The 26-member Board

was given an expanded mandate that combined the functions of its forerunners,

the SCRPPSD and the PPPRC.

The membership of the PPPRA’S Governing Board included stakeholders

in the downstream sector of the petroleum industry and other interest groups. This

broad membership was designed to institute order and sanity in the supply and

distribution chain, as the focus of the sector was to be less on price fixing, and

72

more on the management and moderation of volatility in products prices and wider

acceptance of reforms in the sector.

Accordingly, the primary functions of the Agency includes:

To determine the pricing policy of petroleum products.

To regulate the supply and distribution of petroleum products.

To moderate volatility in petroleum products prices, while ensuring

reasonable returns to the operators.

To maintain constant surveillance over all key indices relevant to pricing

policy and periodically approve benchmark prices for all products.

To establish an information and data bank through liaison with all

relevant agencies to facilitate the making of informed and realistic

decisions on pricing policies.

To identify macro-economic factors with relationship to prices of

petroleum products and advise government on all appropriate strategies

for dealing with them.

To oversee the implementation of the white paper on the Report of the

Special Committee on the Review of the Petroleum Products Supply

and Distribution as they relate to its functions, taking cognizance of the

phasing of the specific proposals.

To establish parameters and codes of conduct for all operators in the

downstream sector of the petroleum industry.

To establish firm linkages with the key segments of the society and

ensuring that decisions enjoy the widest possible understanding and

support.

73

Furthermore , the PPPRA must prevent collusion and restrictive trade practices

harmful to the petroleum sector, and must sharpen its skills at exercising a

mediating role among the stakeholders (Obasanjo, 2003: 157-8). The vision of

PPPRA is to ensure the attainment of a strong vibrant downstream sub-sector

where refining, supply and distribution of petroleum products are self-financing

and sustainable. It was the conviction that realization of the vision of the PPPRA

will transform the sub-sector and put in place an open competitive market that

would engender comprehensive and cost effective-logistics infrastructure and

modern refineries in order to meet the needs of the modern economy (Oluleye,

2003: 134)

3.5 Deregulation and Liberalization of the Downstream of the Petroleum

Sector

The process which began on January 1, 2002 had gone through several

challenging activities which included nationwide consultations, and enactment of

appropriate legislation. In September 2003, the government announced full

deregulation and liberalization of the downstream of the petroleum industry.

According to government, this was intended to address the various problems

encountered under the regulated regime and to promote the long term

development of the sector. What government did and envisaged at the time was

different in several respects from what had been done in the past in the name of

deregulation or liberalization. Previously government had addressed the problem

mainly by increasing the prices of (i.e., withdrawing subsidy on) petroleum

products. Deregulation, as conceived in 2003, involved not just the removal of

government control on petroleum products prices but also the removal of

74

restrictions on the establishment and operations of petroleum operations

(including refineries, jetties and depots), allowing private sector players to be

engaged in the importation and exportation of petroleum products and allowing

market forces to prevail.

The removal of the government control on petroleum products prices

implied that the NNPC started paying the international export price for crude oil

allocated to it rather than the previous US $18 per barrel; thus eliminating the

implicit subsidy on petroleum products. Ideally, price decontrol would have also

meant that the retail prices of petroleum products could vary from day to day from

marketer to marketer, and from one location to another. In recognition of the

adverse impacts of acute price volatility as well as the sharp increases in the

international price of oil in recent years, government provided a cushion through

the PPPRA by adopting a guided pricing for petroleum products based on market

fundamentals and the import parity principle. Government’s objective is to use the

PPPRA to achieve the goal of appropriate pricing of petroleum products. This

happens when pricing allows for full recovery of cost of production or importation;

prompt response to the dynamics of market fundamentals; transparency and ease

of administration; sustainable margins to all stakeholders (i.e. transporters,

dealers, and marketers); and fairness to the end users (Gbadamosi et al.,

2007:170).

75

3.6 Increases in the Prices of Petroleum products

Table 3.2: PMS Price Adjustments (2000 – 2007)

Date/Year Price (N/Litre) Percentage Increase/Decrease

June 1, 2000 From 20 to 30 50

June 8, 2000 From 30 to 25 16

June 13, 2000 From 25 to 22 12

January 1, 2002 From 22 to 26 18

*June 20, 2003 From 26 to 40 53.7

*July 9, 2003 From 40 to 34 17.5

*October 1, 2003 From 34 to 42 17.5

*May 29, 2004 From 42 to 49.9 19

*January, 2005 From 49.9 to 50.5 1

*August 26, 2005 From 50.5 to 65 22.8

*May 24, 2007 From 65 to 75 15.4

*June 23, 2007 From 75 to 70 7.1

Source: PPMC

*denotes the period of study 2003 – 2007.

On the increase and adjustment in pump prices of petroleum products,

PMS, the population for the study consisted of the totality of the various decisions

made by government on the issue. Table 2.3 above shows that during the period

of the study, pump price of petroleum products, PMS were increased for about

eight times.

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3.7 Variations in the Pump Price of Products

Table 3.3: Petroleum Products Prices Monitored Nationwide, Oct. – Nov., 2006 S/N State Petroleum Products, Price (Naira/Litre)

NNPC Major Independent

PMS AGO

DPK PMS AGO DPK PMS AGO DPK

S/N STATE High Low High Low High Low High Low High Low High Low

1 ABIA 73.0 65.0 90.0 85.0 75.0 65.0 75.0 73.0 89.0 85.0 75.0

2 ADAMAWA 65.0 95.0 72.0 98.0 73.0 70.0

3 AKWA IBOM 63.5 80.0 50.0 65.0 93.0 89.0 70.0 75.0 90.0 80.0

4 ANAMBRA 75.0 65.0 83.0 80.0 68.0 83.0 75.0 85.0 85.0 80.0

5 BAUCHI 63.5 80.0 50.0 65.0 97.0 92.0 73.0 70.0 75.0 70.0 85.0 90.0 80.0

6 BAYELSA 65.0 91.0 87.0 70.0 65.0 70.0 93.0 92.0 78.0

7 BENUE 75.0 65.0 76.0 75.0

8 BORNO 65.0 95.0 92.0 75.0 75.0 100 78.0 77.0

9 C/RIVER 65.0 93.0 89.0 70.0 67.0

10 DELTA 76.0 90.0 88.0 73.0 60.0 70.0 65.0 90.0

11 EBONYI 65.0 83.0 80.0 68.0 83.0 75.0 85.0 85.0 80.0

12 EDO 65.0 70.0 68.0

13 ENUGU 63.5 80.0 50.0 75.0 65.0 83.0 80.0 68.0 83.0 75.0 85.0 85.0 80.0

14 EKITI 65.0 88.0 76.0 65.0 88.0 76.0

15 GOMBE 65.0 97.0 94.0 73.0 72.0 72.0 70.0 93.0

16 IMO 65.0 91.0 85.0 75.0 68.0 75.0 80.0 80.0

17 JIGAWA 65.0 96.0 70.0 76.0

18 KADUNA 66.0 65.0 92.0 89.0 70.0 66.0 92.0 90.0 60.0

19 KANO 63.5 80.0 50.0 65.0 94.0 70.0 60.8 69.0 95.0 85.0

20 KATSINA 65.0 84.0 83.0 71.0 70.0 74.0 72.0 85.0 84.0

21 KEBBI 71.0 65.0 97.0 90.0 95.0 90.0 75.0 73.0 100 98.0 93.0 86.0

22 KOGI 65.0 70.0

23 KWARA 65.0 96.0 94.0 74.0 70.0 95.0 86.0 97.0 92.0 95.0 86.0

24 LAGOS 63.5 80.0 50.0 65.0 87.0 76.0 79.0 65.0 65.0 64.5 85.0 84.0 76.0 65.0

25 NASSARAWA 65.0 68.0 65.0 82.0

26 NIGER 65.0 93.0 92.0 78.0 77.0 68.0 65.0 92.0 90.0 90.0 88.0

27 OGUN 63.5 80.0 50.0 65.0 92.0 85.0 85.0 68.0 65.0 86.0 78.5

28 ONDO 65.0 88.0 76.0 65.0 88.0 76.0

29 OSUN 65.0 93.0 89.0 75.0 65.0 65.0 75.0

30 OYO 65.0 93.0 89.0 75.0 65.0 65.0 75.0

31 PLATEAU 65.0 97.0 84.0 73.0 72.0 72.0 70.0 93.0

32 RIVERS 63.5 80.0 50.0 65.0 90.0 70.0 71.0 69.0 94.0 92.0 74.0 72.0

33 SOKOTO 70.0 68.0 98.0 96.0 75.0 70.0 98.0 91.0 75.0

34 TARABA 65.0 82.0 72.0 70.0 75.0

35 YOBE 65.0 95.0 72.0 68.0 75.0 72.0 100 68.0 67.0

36 ZAMFARA 71.0 65.0 98.0 100 82.5 73.0 71.0 98.0 73.0

37 FCT 63.5 80.0 50.0 65.0 93.0 88.5 78.0 75.0 65.0 97.0

Source: PPPRA

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Table 3.3 shows the price ranges of petroleum products for the major and

Independent Marketers, and NNPC Mega stations as monitored by the PPPRA in

36 states and Abuja from October to November, 2006. In the table above, it could

be noted that NNPC sold at the least price consistently wherever they had their

mega stations in the federation. The major marketers, on the other hand sold

petrol PMS mostly at the fixed price of N65.00. Observations reveal that minor

marketers and filling stations in Cross River, Akwa-Ibom, Abia, Anambra, Enugu,

Kebbi, Sokoto and Zamfara sold above N70.00 per litre. Among the independent

marketers, the only places where petrol was sold for N65.00 were Lagos, Ogun,

Ondo, Osun, Oyo and the FCT. In all other states, their prices ranged from N65.00

to N90.00 or N95.00.

3.8 Sale of Refineries and Other Infrastructure

Table 3.4 shows the four Refineries in the country owned by government

through the Nigerian National Petroleum Corporation commissioned between

1965 and 1989 with the underlisted installed capacities.

Table 3.4: Four Refineries and their Installed Capacity

S/N Refinery Date

commissioned

Installed capacity (Bpd)

1 Port Harcourt I 1965 35,000

Port Harcourt Expanded 1971 60,000

2 Warri 1979 125,000

3 Kaduna 1980 110,000

4 Port Harcourt II 1989 150,000

Total 445,000

Source: Nigerian National Petroleum Corporation (NNPC), 2000

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Table 3.5: Petroleum Products Depots and their Storage Capacities (All figures in M3)

S/NO. DEPOT PMS DPK AGO ATK TOTAL 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23.

Benin Ore Mosimi Atlas Cove Lagos Satellite Ibadan Ilorin Suleja Minna Kano Gusau Jos Gombe Maiduguri Yola Makurdi Enugu Aba Calabar Ikeja** Warri* Kaduna* Port Harcourt*

60,700 25,700

163,400 48,000 10,000

102,800 32,500 45,000 24,000 60,000 24,400 72,900 10,000 20,200 39,000 59,300 99,900 56,200 40,200

- 99,200

135,000 145,000

28,700 6,000

76,000 34,000

1,900 28,700

6,800 30,000 15,000 22,500

9,100 8,700 2,300

15,900 21,900 28,100 49,000 26,000 20,100

- 87,700 65,000 93,000

32,000 10,000

127,200 32,300 12,300 40,500 20,000 30,000 24,000 63,000 20,000 43,200

7,200 18,500 24,000 34,300 64,500 29,500 40,000

- 97,400 97,000

141,000

- -57,600

- 1,900

- - - - - - - - - - - - - -

14,500 - - -

12,400 42,300

424,200 114,300

26,300 172,000

59,500 105,000

53,000 145,000

53,500 124,800

19,500 54,600 84,900

121,700 213,400 111,700 103,200

14,500

SUB-TOTAL (NNPC)

1,226,890

676,400

1,007,900

74,000

2,164,800

APAPA Major Mketers Independent Mktrs (Ibafon)

40,000 17,400

17,300 15,200

23,000 54,000

11,500

91,800 86,600

NATIONWIDE TOTAL

1,284,290

708,900

1,084,900

85,500

2,343,200

Source: Pipelines & Products Marketing Company

Note: 1* Denotes Refinery depots where tankage is not strictly dedicated to finished

products. 2** At Ikeja, tank-farm belongs to the major marketing company.

The costal and marine infrastructure are made up of 5 jetties namely: (i)

Atlas cove (ii) Apapa, (iii) Okrika, (iv) Warri and (v) Calabar and two marine

vessels to convey products to storage facilities.

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3.9 State of Affairs in the Petroleum Sector after Deregulation and

Liberalisation

Apart from the sale of refineries, government did not go on with the sale of

other infrastructure. On the advice of the economic team, Obasanjo sold the Port

Harcourt and Kaduna refineries. The process turned into a mockery as the sale

was put on hold due to the difficulty in attracting high quality international

investors. Then having been valued at $800 billion, the refineries were sold off

during Obasanjo’s last days in office in May 2007 for a paltry $500 million to a

consortium close to the president called Bluestar Oil Service Limited (Baker,

2008:6), backed by billionaire businessman Aliko Dangote, and a Chinese firm

(Mordi, 2009:11). The ensuing protests which contributed to a national strike in

June, 2007 saw Bluestar withdraw from the deal and its money refunded.

President Umaru Musa Yar’Adua also reversed the sale within two months of

assuming office.

On the sale of the Eleme Petrochemicals plant in Port Harcourt, reports has

it that it was sold for approximately $225 million to the Nigerian subsidiary of the

Indonesian firm, Indorama Group. The National Union of Petroleum and Natural

Gas Workers described the amount as “not worth the spare parts available at the

plant” (Vanguard, 2006:1). A memorandum of understanding between the

government and BPE apparently agreed that state assets should be sold at the

ratio of 51 – 49 percent. However, Indorama was given a 75 percent equity stake

in the case of Eleme (Baker, 2008:7).

The privatization process of the downstream oil and gas industry has seen

strong opposition from labour groups over the absence of due diligence. The

government is heavily criticized for its willingness to sell state assets without

80

ensuring the development of national refining capacity, which would eventually

remove the need to import much of the refined petroleum products that Nigeria

consumes. The federal government claims it spent a total of $18.6 billion from

2000 – 2006 to import refined petroleum products. Oil workers said the amount

spent on the importation of petroleum products could build at least six new

refineries across the country. It is observed that the failure to develop refining

capacity favours the few elites who benefit from the monopoly that they hold over

refined oil imports. The NLC had requested that the Bureau of Public Enterprises

(set up to oversee the privatization process) should make public the studies

carried out by the consultants Credit Swiss, First Boston and BNP Paribas in order

to establish the estimated reserve prices for the refineries upon which their sale

was eventually based. The NLC questioned the methods of calculation employed

by the consultants which it estimated seriously undervalued the refineries (Baker,

2008:6).

In the Report of the Labour Group of the Committee on the Review of

Petroleum Products Supply and Distribution in Nigeria, the labour group observed

that although the presentations of the SCRPPSD indicated that deregulation of the

downstream sector of the oil industry will resolve most of the supply problems.

Labour’s position was that there were strong presentations that indicated that

deregulation would rather compound the supply situation given the volatility of the

products’ prices in international market and Naira exchange rates, given its

adverse economic implications in terms of price escalation and the attendant

social and political implications (see Report of SCRPPSD, 2000:108-9).

Although it has been argued by the proponents of deregulation that

deregulated prices of petroleum products will eliminate distortion in the market by

81

promoting free competition on a level playing field, this of course will lead to the

removal of single uniform prices to be replaced with multiple competitive prices as

government will no longer set the prices of crude or refined petroleum products. In

Nigeria, the most obvious consequence of petroleum price increase is the rise in

cost of transportation which leads to increase in prices of goods and services.

Every increase in price has profound economy-wide effects and made the

economy more comatose as illustrated in the table below.

Table 3.6: Short-Run Economy-Wide Effects of 10% Increase in Pump Prices of Petroleum Products

Sectors Effects on Sectoral Prices

(% Change)

Effects on Sectoral Output (% Change)

1. AGRICULTURE 0.20 -4.35 2. LIVESTOCK 0.00 -1.69 3. FORESTRY 0.60 -4.07 4. FISHING 0.60 -3.90 5. PETROLEUM 4.02 -3.37 6. OTHER MINING 1.80 -8.33 7. FOOD 0.20 -6.28 8. DRINK (BEV. & TOB.) 0.70 -6.84 9. TEXTILES 0.60 -3.35 10. FOOTWEAR 0.90 -6.09 11. WOOD 0.60 -7.26 12. PAPER 0.70 -4.61 13. DRUG & CHEMICALS 0.80 -4.39 14. REFINERIES 10.00 -5.72 15. RUBBER & PLASTIC 0.20 -4.13 16. IRON & STEEL 2.10 -6.45 17. METAL FABRICATION 1.70 -5.98 18. VEHICLE ASSEMBLY 0.60 2.95 19. OTHER MANUFACTURING 1.20 -2.81 20. UTILITIES 3.30 -4.83 21. BUILDING & CONSTRUCTION 0.50 -1.87 22. TRANSPORT 6.20 -7.03 23. COMMUNICATION 0.90 -1.05 24. DISTRIBUTION TRADE 1.70 -3.44 25. HOTEL & RESTAURANT 0.30 -1.83 26. FINANCE & INSURANCE 1.30 -6.67 27. BUSINESS SERVICE 0.60 -4.70 28. HOUSING 0.00 -1.89 29. COMMERCIAL SERVICE 0.30 -4.03 Source: NISER, Computed from Model Simulation Results. Cited in SCRPPSD (2000)

82

It is indicated that if there is an increase of 10% in the pump price of

petroleum products, there will be an increase of 6.2% in cost of transportation,

petroleum sector 4%, utility (electricity) 3.30%, while the cost of drugs and

chemical will increase by 0.80%. Correspondingly, there will be significant

decreases in output in all the sectors except housing with transportation suffering

the greatest decline of -7.03% while the sectoral output in the drugs and chemical

sector which support the health sector slide to -4.39%.

The IMF has consistently advised the Nigerian government to remove

domestic subsidies on petroleum products (and other essential goods and

services), to bring costs in line with international levels. The proposed 10 Naira

increase per litre of petroleum products was a key factor in the three day national

strike that took place in June 2007. A study by the Nigerian Labour Congress

shows that petroleum products’ prices are by far the highest in Nigeria, in some

cases by as much as fifteen times when compared to its fellow OPEC member

countries. By the time Obasanjo left office, the pump price of fuel had increased

fivefold since 1999. According to Baker (2008: 13-14), the rise in the cost of

domestic fuel had an almost immediate effect on the cost of food, transport and

other essential services. Coupled with massive devaluations of the Naira against

the dollar and rising oil prices, increases in the cost of petroleum products

(kerosene, diesel and PMS) has raised the cost of living beyond the reach of

many average families.

83

CHAPTER FOUR

ROAD TRANSPORT SECTOR: DATA PRESENTATION AND ANALYSIS

4.0 Introduction

Transportation is an essential part of human activity, and in many ways

form the basis of virtually all socio-economic interactions. Indeed, no two locations

will interact effectively without a viable means of movement. In many developing

countries, inadequate transport facilities are often the norm rather than the

exception. Thus a good transport system is essential to support economic growth

and development. Since the attainment of independence in 1960, the problems of

Nigerian transport system include bad roads; inadequate fleet of buses or trucks

and overcrowded trains and airplanes and congested ports. In line with these are

physical problems such as dearth of suitably-trained transport managers and

planners, capital restructuring, bottlenecks, serious issues of institutional reforms

and ineffective traffic regulations. Transport statistics are grouped into four basic

categories, namely Rail, Road, Water, and Air Transport (www.nigerianstat.

govtng:1 accessed on 16 – 03 – 2010).

Road transports is the most commonly used mode of transportation in

Nigeria toady. Road traffic depends on the pattern of human settlements,

accounting for more than 90 per cent of the sub-sectors contribution to the Gross

Domestic Product (GDP). Road transport activities involve the movement of

persons, good and services from one location to another. The optional use of

motor cars for pleasure, also contributes tremendously to the importance of road

transportation. This is more predominant in Nigeria than in most other African

countries because of the poor state of alternative means of transportation (such

as railways) and high cost of air transportation by which journeys could have been

84

made and also due to the psychological satisfaction offered by the possession of

a car (www.nigerianstat.gov.ng/:3-4 accessed on 16/03/2010).

From its share in the GDP, transport is a major input into most

economically productive activities in Nigeria. This observation is clearly supported

by the fact that the commonest reason for increase in the cost of road transport

fares is the increase in the cost price of petroleum products. Road transport

statistics are, therefore, very useful for planning at all levels.

In this research, road transport statistics will include the total number of

roads maintained by the federal and state governments.

85

4.1 Data Presentation Table 4.1: Characteristics of Roads by Zones

OWNERSHIP OF MAIN ROAD BETWEEN LGA HEADQUATER & STATE CAPITAL:

STATE OF THE ROAD

S/N State: No. of LGA

Federal govt.

State govt.

Local govt. Total Tarred Paved Graded Not

graded Total

North East Zone 97 19 0 116 97 1 7 11 116 1 Adamawa 21 17 4 0 21 13 1 0 7 21 2 Bauchi 20 9 11 0 20 20 0 0 0 20 3 Borno 27 27 0 0 27 27 0 0 0 27 4 Gombe 11 11 3 0 14 11 0 3 0 14 5 Taraba 16 15 1 0 16 12 0 0 4 16 6 Yobe 17 18 0 0 18 14 0 4 0 18 North West Zone 111 57 0 192 161 19 8 4 192 1 Jigawa 27 21 13 0 34 7 19 8 0 34 2 Kaduna 23 17 6 0 23 23 0 0 0 23 3 Kano 44 Akwuete 20 0 44 44 0 0 0 44 4 Katsina 34 20 14 0 34 34 0 0 0 34 5 Kebbi 21 20 0 0 20 20 0 0 0 20 6 Sokoto 23 19 4 0 23 23 0 0 0 23 7 Zamfara 14 14 0 0 14 10 0 0 4 14 North Central Zone 102 17 0 119 114 0 4 1 119 1 Benue 23 22 1 0 23 22 0 1 0 23 2 Kogi 21 18 2 0 20 20 0 0 0 20 3 Kwara 16 14 2 0 16 15 0 1 0 16 4 Nassarawa 13 9 4 0 13 12 0 1 0 13 5 Niger 25 29 1 0 30 30 0 0 0 30 6 Plateau 17 10 7 0 17 15 0 1 1 17 South East Zone 59 59 11 129 82 21 12 14 129 1 Abia 17 0 12 4 16 12 0 2 2 16 2 Anambra 21 13 8 0 21 0 19 2 0 21 3 Ebonyi 13 3 9 1 13 6 1 6 0 13 4 Enugu 17 12 5 0 17 16 0 0 1 17 5 Imo 27 31 25 6 62 48 1 2 11 62 South West Zone 31 9 2 42 41 0 0 1 42 1 Ekiti 16 11 5 0 16 16 0 0 0 16 2 Osun 30 20 4 2 26 25 0 0 1 26 South South Zone 35 36 1 72 66 1 0 5 72 1 Akwa Ibom 31 7 24 0 31 29 0 0 2 31 2 Bayelsa 8 1 7 0 8 5 0 0 3 8 3 Cross River 18 14 2 0 16 16 0 0 0 16 4 Edo 17 13 3 1 17 16 1 0 0 17

Source: National Bureau of Statistics: Transportation Algorithm in Nigeria by Local Government as at 2007

86

Table 4.1 shows the characteristic of roads in the different geopolitical

zones in the country and the extent to which the roads have been tarred, paved,

graded or not graded.

Table 4.2: Summary of Transportation Basic Data, 2003 – 2007 by the National Bureau of Statistics

Description 2003 2004 2005 2006 2007 Road transport

Length of Roads (in

kilometers)

34,403 34,403 34,403 40,711.90 40,712.78

Principal Roads 15,688 15,688 15,688 20,117.20 22,234.56

Paved Roads 27,957 27,957 28,453 28,145.00 29,235.00

Bad portions of Paved Roads

6,446 6,466 6,466 6,640.76 6,789.5

Source: Federal Ministry of Works (see NBS, Statistical Fact Sheet, 2007: 22)

The table above shows that the total length of roads maintained by the

federal ministry of works and the federal government which was estimated at

about thirty four thousand kilometers in 2003 and increased to about forty

thousand kilometers in 2007, the principal roads within the period increased from

about fifteen thousand to twenty two thousand kilometers out of which twenty

seven to twenty nine thousand kilometers was paved while about six thousand

kilometers were bad portions.

4.2 Budgetary Allocation on the Road Transport Sector

A classification of the federal government’s total capital expenditure on

roads construction over the period shows that N17.6bn was expended in 2003,

N40.7bn in 2004, N89.1bn in 2005, N72.5bn in 2006 and N108.9bn in 2007 (see

CBN Annual Report and statement of Account, 2007:198). The percentage

87

distribution of federal government’s total expenditure recurrent and capital over

the period reveals that 2.81% was expended on roads construction in 2003,

3.80% in 2004, 5.81% in 2005, 4.72 in 2006 and 5.74 in 2007 (The NBS,

Statistical Fact Sheet, 2007:45).

The federal ministry of works in 2004 set to design 48 roads, 4 new

strategic bridges and commence the construction of 15 road projects to include –

Benin-Asaba Road, Abuja-Keffi, Byepass Onitsha-Owerri Road, Bodo-Bonny

Road and Bridge, Kudzum bridge and road, Rafinkdad Donga Road and Donga

bridge. The federal roads maintenance agency was to rehabilitate 24,500 of the

26,400km of roads it set out to achieve with the patching of potholes (Report on

the Implementation of the 2004 Budget, 2005:62).

88

Table 4.3: Programme target and stage of implementation on the Works Ministry Budget Report (2005).

S/NO Projects/ Programmes

Amount Appropriated in 2005

Amount Accessed in 2005

Amount Spent in 2005

Targets set for 2005

Achievements in 2005

Remarks

1 Total appropriation to MDA

N87.95 billion N68.95 billion

N68.95 billion

2 Dualisation of Onitsha-Owerri Road

N 4.54 million N2.99 million

N2.99 million

To complete the project in October 2007

26% of the project was achieved at the end of July, 2006

Delay in payment of compensation to affected communities due to financial distortions by Works Sector slow down project implementation

3 Dualisation of Ibadan-Ilorin Road (Ogbomosho-Ilorin) – Section III

N 2.48 billion N2.48 billion

N2.48 billion

To complete the project in November 2006

The project stood at 75% completion stage

Target of completing the project in November could only be met if the FMW funded maintained the financial flow to the project.

4 Numan-Guyuk-Biu Road Section I

N639.74 million N639.74 million

N639.74 million

To complete the project in August 2006

Project achieved 90% execution when inspected

Contractor promised to complete and hand over the project before the end of 2006.

5 Numan-Guyuk-Biu Road Section II

N639.74 million N639.74 million

N639.74 million

To complete and commission the project in August 2006

25% of the Section II of the road project was achieved by the FMW at inspection time

Delay in payment of mobilization fee to contractor to fast track implementation. Contract is scheduled to be completed in 2006

6 Rehabilitation of Funtua-Dayi-Yashe-Kano Road

N 400.0 million N400.0 million

N400.0 million

To repair the failed portion of the road and complete project by January 2006

The project achieved 22.5% as at July 2006

The project was not properly funded by the Federal Ministry of Works from its budgetary allocations due to thin spreads of funds on other projects

7 Dualisation of the Mokola-Sango-UI-Ojoo Road in Ibadan

N 394.3 million N394.3 million

N394.3 million

To commence construction work; with expected completion date of December 2006

Work was in progress, with about 23% project implementation

8 FERMA N 16.22 billion N17.16 billion + N2.5 billion loan

N17.16 billion + N2.5 billion loan

To maintain/ repair 26,0000km or the operation 500 road project

12,000 km (60%) was achieved. Emergency projects were undertaken as occurred

FERMA would require additional fund to achieve it target. The agency embarked on emergency maintenance works and projected operation 10000 roads.

Source: Report on the Implementation of the 2005 Budget (2006:69).

Table 4.3 shows the project implementation report of the 2005 budget on

the works sector, the following projects and programmes were targeted and

achieved.

89

In an interview with the National Operation Co-ordinator, Association of

Road Transport Owners, Alhaji Lawal Isa, he remarked that the state of the road,

did, not only constitute a danger to commuters, but had also become death trap to

people’s lives and goods. According to him, this mainly accounted for the loss of

lives being recorded on a daily basis on the roads. He said the “issue is that some

of the money that is yearly budgeted for roads is being diverted to private

pockets”. He stated further that “if you go for a stakeholder’s meeting, what you

hear is that trailers are damaging the roads, that overloading is causing damage”.

To him the fact of the matter is that these trailers have a limited capacity that is

allowed for them to carry, which is 30 tonnes. If the authority permits 30 tonnes,

the same authority must be guided by the weight of the trailer in order to construct

a road that will be able to support the weight of the trailer (Adebayo et al., 2009:2).

Given the huge revenue that has accrued to the Nigerian government from

the sale of crude oil, the dilapidated state of the nation’s highway is as a result of

mismanagement and neglect rather than lack of funds. In the past ten years,

Nigerians have had to live through harsh measures such as compulsory economic

emergency taxes, sundry hikes in fuel prices, value added tax (VAT), and multiple

levies. All along these harsh measures have been premised on improved social

services and infrastructure, transportation being a key priority. Sadly monies raked

in especially from incessant hikes in fuel prices and VAT, hardly reflect in the state

of services and facilities available to the citizenry. Most reprehensive is the failure

of the Federal Roads Maintenance Agency (FERMA) in discharging its statutory

responsibilities. The body, which draws its operational funds from the Highway

maintenance charge (reflected on the template for petroleum products pricing), is

90

basically a conduit to milk the public dry while leaving the federal roads in

shambles (www.allafrica.com accessed 26/03/09).

Most of the roads at the time of this study were almost impassable,

especially during the rainy season when erosion ravaged them resulting in traffic

hold up for long hours. Apart from accidents and high casualties, travelers on

Nigerian roads are easy prey to armed robbery attacks as hoodlums chose the

bad portions of the roads to ambush and disposes roads users of their properties

and money. Although accident on Nigerian roads are sometimes caused by

reckless driving and poor vehicular maintenance a large proportion of ghastly

accidents are attributable to bad roads. Currently with no prospects of adequate

maintenance, the condition of the roads portend grave danger, more destruction,

high transportation cost, a rise in prices of food stuff with frightening prospects for

the crisis ridden economy (www.allfrica.com accessed on 26/03/09).

4.3 Increase in the Cost of Transport fares.

The news of the plan to introduce new prices of petroleum products often

starts as mere speculation which are initially denied by government officials. The

speculation normally causes some confusion at most fuel stations as most fuel

stations stop selling in anticipation to the new prices while the few that continue to

sell have long queues which often cause chaotic traffic conditions on the roads.

When the increase in pump prices of products is eventually effected it also leads

to increase in the cost of transportation and road fares.

91

Table 4.4: Increase in price after the August 2005 Increase in price of PMS

S/N Routes Increase in fares (N)

1 Ojodu – Ikeja 40 – 50

2 Ojodu – Ojota 30 – 40

3 Ojoka – Yaba 50 – 60

4 Oshodi – Sango-Ota 70 – 100

5 Lagos – Port Harcourt 1750 – 1950

6 Lagos – Ugheli 1450 – 1650

7 Lagos – Warri 1350 – 1500

8 Lagos – Benin 1000 – 1200

Source: Newswatch Magazine, 2005.

The table above shows the observation of increase in road fares monitored

in Lagos after the August, 2005 increase in the price of premium motor spirit from

N50.50 to N65, it was observed that in a swift reaction, transporters on intra-city

routes increased their fares. A trip from Ojodu to Ikeja, which used to be N40 went

for N50, while Ojodu to Ojota went up to N40 as against N30 before the increase.

Similarly, a trip from Ojota to Yaba which used to cost N50 went up to N60. The

fare from Oshodi to Sango Ota rose from N70 to N100 ( Obasi, 2005:31).

Inter-state routes were not left out. At the NDDC-assisted mass transit

company in Jibowu, Yaba, George Umukoro, the transport manager told the

correspondent that the fare from Lagos to Port Harcourt went up to N1,950 as

against the old fare of N1,750, while that of Ughelli rose up to N1,650 from

N1,450. He also said that Lagos to Warri which used to be N1,350 went up to

N1,500, while Lagos to Benin had also increased from N1,000 to N1,200

(Obasi,2005:31).

92

At the Chisco Transport Company, Jibowu, Mark Ernest the assistant manager

expressed the company’s helplessness at the increase. He said that it has led to

increase in the overhead cost of Chisco, which definitely would result in the

increase in the cost of fares to be borne by the commuters. When contacted

Ndubisi Madu, the planning and business development manager, Ekene Dili

Chukwu transport company, at Oregun, showed his displeasure at the increase

since it had doubled expenses which by and large had to be checked by

increasing the cost of transport on the fares on the passengers ( Obasi,2005:32).

Table 4.5: The Schedule of Road Transport Fares

S/N Operational Routes

2003 2004 2005 2006 2007

1 Uyo – Lagos N 1850

N 1850

N 1850

N 2650

N 3650 A/C 3150 N A/C

2 Uyo – Abuja 1850 1850 1850 2650 3150 N A/C 3650 A/C

3 Uyo – Kaduna 1920 1940 2010 2850 3650 N A/C 4150 A/C

4 Uyo – Jos 1850 1850 1850 2850 3650 5 Uyo – PH 510 510 610 910 1010N A/C

1110 A/C 6 Uyo – Enugu - - - - 1100 A/C

1010 N A/C 7 Uyo – Calabar 350 350 450 450 510 N A/C

610 A/C 8 Uyo – Aba Bus – 350

Taxi – 400 Bus – 350 Taxi – 400

Bus – 450 Taxi – 500

Bus – 450 Taxi – 500

Bus – 450 Taxi – 500

Source: Akwa Ibom State Transport Company (AKTC)

Note: A/C = Air Condition;

N A/C = Non-Air Condition

An observation of the schedule of fares of a major transport company,

indicates that there has been a continued increase in the cost of transport fares

over the period of study. An interview conducted with the Director of

93

Administration, Elder J.D. Umoren, of the transport company revealed that

increase in the cost of fares were as a result of certain reasons namely: increase

in the pump price of petroleum products, festive seasons such as Christmas,

Easter and Salla celebration, bad roads and high cost of spare parts.

Table 4.6 Percentage increase/decrease in PMS Price Adjustment 2003 –

2007 Date/Year Price (N/Litre) Percentage

Increase/ Decrease

June 20, 2003 From 26 to 40 53.7

July 9, 2003 From 40 to 34 17.5

October 1, 2003 From 34 to 42 17.5

May 29, 2004 From 42 to 49.9 19

January, 2005 From 49.9 to 50.5 1 August 26, 2005 From 50.5 to 65 22.8

May 24, 2007 From 65 to 75 15.4

June 23, 2007 From 75 to 70 7.1 Source: PPMC Table 4.6 shows the percentage increase/decrease in PMS Price

Adjustment between 2003 – 2007. It shows that fuel price was increase and

adjusted for a record of eight times.

Table 4.7: Percentage distribution of GDP of the road transport sub-sector, 2003 – 2007 Year Percentage distribution 2003 1.68

2004 2.38

2005 2.38

2006 2.40

2007 2.42 Source: NBS (Nigerian Statistical Fact Sheet, 2007:8)

94

Table 4.7 shows the analysis of the percentage distribution of the Gross

Domestic Product (GDP) at constant basic prices in the Road Transport sub-

sector indicates the following percentage distribution; 1.68% in 2003, 2.38% in

2004, 2.38% in 2005, 2.40% in 2006, and 2.42% in 2007 (NBS, Statistical

Factsheet, 2007:8).

4.5 Data Analysis

Table 4.8: Correlation Analysis on Percentage Increase/Decrease in PMS Price Adjustment and GDP on Road Transport subsector

Year

% increase/Decrease

in PMS price X

% of GDP on Road transport

subsector Y

XY

X2

Y2

2003 29.57 1.68 49.68 874.38 2.82

2004 19.00 2.38 45.22 361.00 5.66

2005 11.90 2.38 28.32 141.61 5.66

2006 0.00 2.40 0.00 0.00 5.76

2007 11.25 2.42 27.23 126.56 5.86

71.72 11.26 150.45 1503.55 25.76

H0: There exist no significant positive relationship in the deregulation of the

downstream of the petroleum sector and the development of the road

transport sector of the Nigerian economy.

H1: There exist a significant positive relationship in the deregulation of the

downstream of the petroleum sector and the development of the road

transport sector of the Nigerian economy.

Level of significance = 0.05

95

2-nr-1

r t StatisticsTest 2

2222 ynxxn

xyn r Where

y

yx

n = the number of paired observations = 5

number of degrees of freedom = n – 2 = 5 – 2 = 3

2.29 -

30.64-1

0.8

3(-0.8)-10.8- t

8.0

(11.26) - (25.76)5)71.71()55.1503(5(11.26) (71.72) - (150.45) 5 r

2.35 0.05(3)

t 0.05

2)-(n t table-t

2

22

Decision Rule: H0 is rejected if the positive value of the calculated t is greater

than its table value at 0.05 level of significance, and accepted when otherwise.

Conclusion: Since the positive value of the calculated t= 2.29 is less than the

table value of t= 2.35. H0 is accepted, hence there is no significant positive

relationship.

4.6 Discussion of Findings

Prior to the period of the deregulation of the downstream of the petroleum

sector, the condition of the roads and other infrastructure were in critical condition

96

thus necessitating government’s intervention. In spite of the huge sum of money

sunk into road construction, rehabilitation and reconstruction by the federal and

state governments, most Nigerian roads are still in a deplorable situation. A

survey conducted by the Punch Newspapers of roads in the Federal Capital

Territory, Abuja and many states in the country reveals that much still need to be

done in the areas of monitoring, execution, sincerity and political will to have an

effective road infrastructure. The survey went further to show that though Nigeria

was among the few African countries that could boast of sufficient road network, it

was grossly inefficient because of the level of dilapidation.

A release by the Ministry of Works, Housing and Urban Development

indicates that the Federal Government controlled about 34,000kms of roads in the

country. Also a document by the Federal Roads Maintenance Agency revealed

that the country’s national road network was currently estimated at 194,200km

with an estimated asset value of N4,567 billion out of which 34,120kms

(amounting to 17.6 per cent) were federal roads with asset value of N1,261 billion.

The local and rural roads covered 129,580kms (66.7 per cent). The document

also revealed that in 2007 the quality structure of the federal road network

indicated that 15 percent was in a very good condition, 20 percent in good or fair

condition while about 30 percent and 35 percent were in poor and bad conditions

respectively. It also showed that for a period of eight years, about N500 billion had

been expended on the rehabilitation of about 3,500kms of 34,120km of federal

road network. The Federal Road Maintenance Agency have been ill-equipped to

handle most the deplorable situations on the Nigerian roads. Their work of

maintaining the road has not gone beyond the filling and patching of potholes on

the roads.

97

An on the spot assessment of major roads in each of the geopolitical zones

in the country shows that in the South-west, Lagos-Ibadan road which is a dual

carriage way is in a relatively fair condition with parts of the roads adorned with

pot-holes and portions that had peeled off which needs to be refilled and

upgraded. In the North-West zone, the Kano – Katsina road is a single road of

156km, it has many pot holes and large stretches have been damaged by erosion

due to lack of gutters for drainage. In the South-East, most of the roads are in

poor condition with pot holes, gullies and erosion affecting them. This is due to

lack of maintenance, as many of them have not been rehabilitated for over 30

years. The Owerri – Onitsha, is in a very bad condition with gullies and ditches

adorning the whole stretch of the road. As a result, the road is unsafe and the

traffic flow is very slow. Thus a journey of 1½ hours in the 90.5km road takes

about 3 hours or more.

In the South – South, the Warri – Port Harcourt (East/West Road) has

become unmotorable due to neglect and poor maintenance. A journey from Warri

to Port Harcourt, which ordinarily should take two hours now takes about four

hours, due to the poor state of the road. In 2008 Julius Berger Plc, the

construction company awarded the reconstruction and rehabilitation of the road,

had to pull out due to incidence of kidnapping of its expatriates staff. The Calabar-

Itu highway which was constructed more than 25 years ago is in dire need of

reconstruction, rehabilitation and expansion. The more than 90km length of road

is full of pot-holes with failed portions along the Odukpani axis in Cross River

State. In the North- East, the Maiduguri-Damaturu Road is in fair condition though

some potholes adorn many parts of the road with peeled off portions which needs

to be reconstructed. In the North-Central, the Abuja-Keffi Road is in a fair

98

condition due to its reconstruction and expansion. While the Jos-Shendam,

Pankshin-Shendam, Jos-Langtang with a stretch to Namu were in their worst

conditions and begging for attention.

99

CHAPTER FIVE

PUBLIC HEALTH SECTOR

5.0 Introduction

The health care delivery system refers to all the formal and informal

activities centred on the provision of health services for a given population. Health

services refer to the sum of all the units that deal with the health and diseases of

members of a community. The units include medical care services, public care

services, health education, health research, preventive and curative health

services. Basic health service is described as a network of peripheral,

intermediate and central health services manned with professionals and auxiliary

personnel to effectively discharge specific functions considered essential to

ensure the good health of the population of a country. Such a network will of

necessity comprise polyvalent health units starting from the dispensary, maternity

and health centers to the most advanced and centrally placed state hospitals and

tertiary institutions. Every community needs to develop or evolve a pattern or

system of organizing efforts for the purpose of preventing and treatment of

diseases. However the forms may differ in terms of its sophistication – some are

very simple, some are very complex and some sophisticated. The factors which

determine the type of health services in a community are political, historical,

cultural, economic, demographic, scientific and technological development or

advancement (Ojo and Briggs, 1982:431).

Health is the general condition of a person in all aspects. It is also a level of

functional and or metabolic efficiency of an organism. The state of health of a

nation’s citizens and facilities become very significant since only healthy people

can produce and thereby contribute to national income and development. World

100

Health Organisation (WHO) defines health as being “a state of complete physical,

mental, and social well being and not merely the absence of disease or infirmity.”

This does not imply that a nation whose citizens enjoy good health is a nation

where there is absence of disease or infirmity. While it is not practicable for

citizens of a nation to be without diseases or infirmity, the following are required

for a healthy community or nation:

(i) A substantial proportion of the population must be healthy;

(ii) Health facilities must be available if possible for everyone that needs

them; and

(iii) Information must be available on what our major health problems are

and suitable provisions made for them (Ekpo and Umoh, 2004:126).

After years of neglect, the public health sector has increasingly become a

major source of concern to the Nigerian Government. Improved fertility, better

health and the resultant increased life expectancy on the one hand, and

population control on the other, are being pursued as mutually compatible

programmes today in Nigeria as in most other developing countries. In this

direction, government must rely on adequate health statistics for planning and

monitoring its relevant programmes. Data are also needed to estimate health

statistical indicators which are required for making geographical (inter-regional

and international) comparisons of the health situation in Nigeria

(www.nigerianstat.gov/ng:1 accessed on 06/04/2010).

Statistics and issues in the health sector cover the following broad areas:

- Health Policies and Programmes

- Resources for health care delivery

- Usage of health care delivery facilities

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- Vital statistics and demographic characteristics

- Budgetary provisions for health care delivery.

In spite of the modest efforts by government, most of which were supported by

international agencies, Nigeria’s health statistics are in a very bad shape. They

are generally, uncoordinated, incomplete, unreliable and untimely. This situation

has prompted recent efforts of government and UNDP to improve on the

management of health statistics in the country. These statistics are generated

mainly through routine sources from Health Services Delivery Points such as

hospitals, clinics, maternity homes and dispensaries. They are then collated at the

local government area, state and the national levels (www.nigerianstat.gov/ng:2

accessed on 06/04/2010). The federal ministry of health (FMH) is the major

source of routine health statistics in Nigeria. However, the National Bureau of

Statistics (NBS) is the principal source of published health statistics in the country.

5.1 Health Policies and Programmes

A national health policy targeted at achieving health for all Nigerians was

promulgated in 1988. In view of emerging issues and the need to focus on

realities and trends, a review of the policy became necessary. The new policy,

referred to as the Revised National Health Policy, launched in September 2004,

describes the goals, structure, strategy, and policy direction of the health care

delivery system in Nigeria. Roles and responsibilities of different tiers of

government, including non governmental organizations are outlined. The policy’s

long- term goal is to provide adequate access to primary, secondary, and tertiary

health care services for the entire Nigerian population through a functional referral

system.

102

The following principles and values underpin the Revised National Health Policy:

Social justice, equity, and the ideals of freedom and opportunity affirmed in

the 1999 Constitution of the Federal Republic of Nigeria are a basic right.

Health and access to quality and affordable health care is a human right.

Equity in health care for all Nigerians will be pursued as a goal.

Primary health care (PHC) shall remain the basic philosophy and strategy

for national health development.

Good quality health care shall be assured through cost-effective

interventions that are targeted at priority health problems.

A high level of efficiency and accountability shall be maintained in the

development and management of the national health system.

Effective partnership and collaboration between various health sectors shall

be pursued while safeguarding the identity of each (NPC, 2009:4-5).

Because health is an integral part of overall development, inter-sectoral

cooperation and collaboration between the different health-related ministries,

development agencies and other relevant institutions shall be strengthened; and a

gender-sensitive and responsive national health system shall be achieved by

mainstreaming gender considerations in all health programmes.

The overall objective of the Revised National Health Policy is to strengthen

the national health system such that it will be able to provide effective, efficient,

quality, accessible and affordable health services that will improve the health

status of Nigerians through the achievement of the health-related Millennium

Development Goals (MDGs). The main health policy targets are the following:

Reduce the under-five mortality rate by two-thirds between 1990 and 2015,

103

Reduce the maternal mortality rate by thre-quarters between 1990 and

2015,

Reduce the spread of HIV/AIDS by 2015,

Reduce the burden of malaria and other major diseases by 2015.

The national health policy regards primary health care as the framework to

achieve improved health for the population. Primary health care services include

health education; adequate nutrition; safe water and sanitation; reproductive

health, including family planning; immunization against five major infectious

diseases; the provision of essential drugs; and disease control. The policy

document requires that a comprehensive health care system delivery through the

primary health centres should include maternal and child health care, including

family planning services.

The health sector is characterized by wide regional disparities in status,

service delivery, and resource availability. More health services are located in the

southern states than in the northern states. The current priorities in the health

sector are in the area of childhood immunization and HIV/AIDS prevention (NPC,

2009:5).

5.2 Funding and Resources for Health Care Delivery

Health care provision in Nigeria is a concurrent responsibility of the three

tiers of government in the country. The Nigerian public health care delivery system

and administration is classified and funded under three structures. This include: (i)

the tertiary health care delivery which is made up of University Teaching Hospitals

and Specialist Hospitals and is funded by the Federal Government; (ii) the

secondary health care delivery which is made up of general hospitals, infectious

104

diseases hospitals (IDH) funded by the state governments; and (iii) the primary

health care delivery, made up of health centres and cottage hospitals, mostly

found in the rural areas and are funded by the local government councils across

the country.

However private providers of health care have a visible role to play in

health care delivery. The private sector provides 65.7% of health care delivery in

Nigeria. Efforts are on for increased public private participation in health care

delivery but there is yet to be a framework for collaboration. However, states in

Nigeria have implemented lot of initiatives on private sector participation in health

care delivery. The need for collaboration between public and private sectors was

addressed by the Health Sector document and a framework is being developed to

operationalise it. While there are contractual agreements in the areas of security,

laundry, equipment, supply and maintenance. In addition, training will be given to

Federal Ministry of Health and State Ministry of Health Staff in use of equity tool

for health programming. This will strengthen health programming capability to

address the issues of access, especially for the poor and vulnerable population. In

order to ensure that the health system continues to perform at optimal capacity,

training will be provided for some SMOH staff in Health Systems Development

and Health Systems Performance Assessment. In furtherance of the public-private

sector partnership (PPP) to enhance access to health, catalytic funds for piloting

contracting of health services in some states was to be provided as a way

generating evidence for the usability of PPP in health care delivery systems in

Nigeria (http://www.who.int/countries/nga/areas/health-systems accessed on 11/

04/ 2009).

105

Providing financial access to all citizens has long been the cornerstone of

modern health care systems and globally health care expenditures have risen. Per

capita health expenditure for developed countries is high as they spend more on

health care delivery. This may be responsible for the better health outcomes that

are recorded in the developed countries. In Nigeria, health care expenditure is not

only low, but two thirds of it is out of pocket, thus reducing access especially to the

poor and vulnerable groups. There is currently no system for monitoring health

expenditure, in terms of distribution and trends as the National Health Accounts is

as best rudimentary (See Report of the Vision 2020 National Technical Working

Group on Health, 2009: 16).

In Nigeria as in most developing countries, the cost of health services is

high since it is not subsidized by government. The absence of basic drugs in

hospitals has increased the cost of medical facilities to most Nigerian. This

compelled the federal government under Decree No. 35 of May, 1999 to create

the National Health Insurance Scheme. The scheme encompasses government

employees, the organized private sector and the informal sector. The scheme also

covers children under five, permanently disabled persons and prisons inmates.

The NHIS aims to mobilize resources in a sustainable manner for the provision of

accessible, quality health care for all irrespective of status. Contributors can

access health care needs from approved public and private service providers.

Participation is optional except for workers in the public and private sectors who

will contribute 5 percent of their basic salary to the scheme while their employers

pay 10 percent for each worker, which entitles a contributor, a spouse and four

children to access Medicare from any approved services provider

(www.nigeriafirst.org:1 accessed 09/04/2010).

106

5.3 Usage and Accessibility to Health Care Delivery Facilities and

Personnel

Health is central to community well-being as well as to personal welfare. It

has a strong influence on people’s earning capacity and it is fundamental to

people’s ability to enjoy and appreciate all other aspects of life. Thus accessibility

to health facilities is regarded as an individual or community’s ability to obtain

health care (Olujimi, 2007:45). Studies have revealed that socio-economic status

is positively related to the use and accessibility to medical facilities in Nigeria such

that the odds of reporting medical cases and use of facilities are six times as high

among individuals from the richer households compared to their counterparts from

poorer households (Babalola and Adesegun, 2009:2). It is generally agreed that

factors influencing health services utilization operate at various levels namely –

individual, household, community and state.

Medical facilities and personnel in Nigeria are limited, unavailable and often

in poor condition. Often times, drugs are not available in the government health

institutions and some facilities for the conduct of medical examinations and tests

are either not available or not functioning. Therefore, patients are to make

purchase of drugs and conduct such medical tests and examinations outside the

government health institution. The government health institution located in the

rural areas are worst-affected by these inadequacies. The frustrations on the part

of the health consumers as a result of the inadequacies often forced health

consumers to patronize private health institutions which may be well equipped in

the urban centres (in most cases dominated by unskilled medical personnels

especially in the rural areas) and patent medicine store operators (Olujimi,

107

2007:53). While the rich and top government functionaries might sometime travel

abroad to seek medical treatment.

Concerted effort was made to improve the country’s public health sector

which had deteriorated in recent decades. The deterioration was manifested in

various forms, such as the absence of modern medical tools and equipment, as

well as dilapidated and poorly maintained health infrastructure. A total sum of

N22.2 billion was released to the health sector in 2005 for the rehabilitation and

upgrading of medical facilities in eight teaching hospitals, with 4 each located in

the northern and southern parts of the country. The Federal Government had

contacted Vamed an Austrian engineering firm to rehabilitate, upgrade and

provide standardized equipment in Ahmadu Bello University Teaching Hospital,

University College Hospital Ibadan, Jos University Teaching Hospital, Lagos

University Teaching Hospital, University of Nigeria Teaching Hospital, University

of Maiduguri Teaching Hospital, University of Port Harcourt Teaching Hospital,

and University of Ilorin Teaching Hospital. There are two components of the

project; the installation of modern and specialized medical equipment at the

various teaching hospitals as well as the training of bio-medical staff which is

being conducted by Messrs Vamed (see Report on the Implementation of the

2005 Budget: 46).

5.4 Vital Statistics and Demographic Characteristics

Available data on Nigeria’s health sector indicate that it was in deep crisis

because of the following:

The primary health care system on which the national health policy is

anchored had in the words of the then Minister of Health ‘collapsed’.

108

Immunization coverage declined from about 80% in the early 1990s to 13%

by 2003.

The public health care facilities whether at the secondary or tertiary (both

state and federal) that were absorbing nearly seventy-five per cent of the

annual capital and recurrent budgetary provisions were in complete state of

disrepair.

The publicly funded health care facilities were being under-utilized for a

variety of reasons.

There was massive flight of qualified health personnel to other parts of the

world where the conditions of service were much better than in Nigeria.

The public health care institutions were involved in incessant strike action

by all cadres of workers.

Intra- and inter-professional rivalry among health personnel compromised

output and efficiency, making it difficult for workers to excel in work

situation.

The morale of all cadres of health personnel in the public sector was low

due to the conditions under which they worked.

The government did not harness all the available health care resources in

the public and private sectors in the country for the benefit of the

population. Consequently, there was no public private partnership in health

care delivery despite the fact that substantial proportion in the population

preferred the services of the private sector providers.

The budgetary provisions for the public health care system declined

precipitously due to the devaluation of the naira, resulting in decrepit state

of facilities. A recent survey of fifteen tertiary health facilities found that

109

theaters including equipment in all of them either had broken down for

years and/or were unavailable, rendering the staff working in them under-

employed. (see Report of the National Technical Working Group on Health

on Nigeria Vision 2020 Programme, 2009:12).

The most readily available health statistics in Nigeria is published by the

National Bureau of Statistics. The statistics are on:

(i) Health establishments in Nigeria by type

(ii) Registered health personnel

(iii) Reported cases of, and deaths in public medical institutions etc.

All these are obtained from the Federal Ministry of Health. Also in its

publication titled Social Statistics in Nigeria, the NBS publishes statistical

information on selected aspects of human health including: those included in the

Annual Abstract of Statistics and illness and injury rates by state, gender and age

group.

5.5 Presentation of Data

Table 5.1 below shows the statistics of medical institutions, public health

sector during the period of this research.

Table 5.1: Public Health Data, 2003 – 2007 DESCRIPTION 2003 2004 2005 2006 2007 Medical Institutions: Number of Hospitals 23,618 23,641 24,522 24,753 24,879 Number of Health Centers & Dispensaries

20,610 20,653 21,222 21,325 22,345

Number of Hospital Beds 73,230 73,680 85,523 86,235 97,567 Medical Personnels: Number of Physicians 40,159 41,935 42,563 55,376 55,376* Number of Nurses & Midwives 136,751 158,920 169,923 219,089 219,089* Source: Federal Ministry of Health, State statistical agencies and NBS

(see The Nigerian Statistical Fact Sheet on Economic and Social Development

2007:34).

110

Human population statistics can also be used as denominator variable for

computing important health indicators, this can be obtained by dividing the total

number of the population on the available number or statistics of medical

personnel, equipments and infrastructure as indicated in the table below.

Table 5.2 below shows the demographics characteristics of the Nigerian health

sector.

Table 5.2: Demographics Characteristics of the Nigerian Health Sector. Description 2003 2004 2005 2006 2007

Total population 125,620,000 129,175,000 133,767,000 140,003,542 N/A

Demographic characteristics

Population per

physician

3128

3080

3142

2528

N/A

Population per Nurse 919 813 787 639 N/A

Population per

Hospital Bed

1715

1753

1564

1623

N/A

Source: Author’s computation, NBS Note: NA = Not-Available

Data in Table 5.1 shows that the public health data in Nigeria was also

used to compute the demographic characteristics of the Nigerian health sector as

shown in Table 5.2. It shows that an average of one doctor is available to a

population of 2528 – 3128 people, one nurse is available to a population of 639 -

919 people, while one hospital bed is available to a population of 1623 – 1715

people.

111

5.6 Global trends in the Health Sector

5.6.1 Comparative Benchmark Analysis

Nigeria is among the low income countries in the world and presumably

with poor socioeconomic indicators. Among the countries which share the same

socio-economic status with Nigeria are Senegal, Kenya, and Ghana. Following

are table and figures showing a few health and economic indicators for Nigeria

vis-à-vis other countries in Africa for ease of reference.

Table 5.3: Health and Economic Indicators for Nigeria vis-a-vis Selected African Countries Indicators+ Nigeria Ghana Senegal Kenya Botswana South

Africa Namibia Egypt

Total Fertility 5.8 4.4 5.0 5.0 3.2 2.8 4.0 3.3 MDG Contraceptive Prevalence Rate % of women ages 15-49

13 25 11 39 40 56 44 60

% of Births Attended by Skilled Health Personnel

35 47 58 42 94 84 76 69

% of Infant with Low Birth Weight

14 30 21 N/A 10 15 14 12

Infant Mortality Rate per 1000 Live Births

101 68 78 79 84 54 47 26

Under-five Mortality Rate per 1000 Live Births

197 112 137 12 116 67 63 36

Condom Use at the Last High-risk sex++

24(W) 46(M)

33(W) 52(M)

34(W) N/A

25(W) 47(M)

75(W) 88(M)

20(W) (nil)

48(W) 69(M)

Nil

Maternal Morality Ratio per 1000 Live Births

80 54 69 100 10 23 30 8.4

Adult Literacy Rate for Female+ +and General Population+++

N/A 49.8(W) 57.9(G)

29.2(F) 39.3(G)

70.2 (F) 73.6(G)

81.8 (F) 82.4 (G)

80.9 (F) 82.4 (G)

83.5(F) 85.0(G)

59.4(F) 71.4(G) GPD Per

GPD Per Capital in US Dollars

560 409 683 481 5073 4675 2843 1085

+ Based on 2004 data ++ W=Women and M=Men +++ General Rate for both Male and Female in the population Source: UNDP: Human Development Report, 2006

112

5.7 Budgetary Provisions for Health Care Delivery

Since the provision of access and improvement of facilities has long been a

cornerstone of modern health care systems globally, public finance statistics and

expenditure on the sector has increased due to the federal governments decision

to pay greater attention on the sector which was neglected thereby leading to

deterioration in the state of facilities and services being offered in the nations

public health sector.

A functional classification of Federal Government total capital expenditure

during the period of this study shows that there was an increase in capital

budgetary allocation of N6.4b in 2003, N18.2b in 2004, N21.8 in 2005, N32.2

billion in 2006 and N41.8b in 2007 (see CBN Annual Report and Statement of

Account 2007:198). While the percentage distribution of federal government’s total

expenditure (recurrent and capital) over the period reveals that 3.24% was

expended on the health sector in 2003, 3.58% in 2004, 4.21% in 2005, 4.86% in

2006 and 5.59% in 2007 (The NBS, Statistical Fact Sheet, 2007:45).

Table 5.4: Percentage increase/decrease in PMS Price Adjustment, 2003 – 2007 Date/Year Price (N/Litre) Percentage

Increase/ Decrease

June 20, 2003 From 26 to 40 53.7

July 9, 2003 From 40 to 34 17.5

October 1, 2003 From 34 to 42 17.5

May 29, 2004 From 42 to 49.9 19

January, 2005 From 49.9 to 50.5 1

August 26, 2005 From 50.5 to 65 22.8

May 24, 2007 From 65 to 75 15.4

June 23, 2007 From 75 to 70 7.1 Source: PPMC

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Table 5.4 shows the percentage increase/decrease in PMS Price

Adjustment between 2003 – 2007. It shows that fuel price was increase and

adjusted for a record of eight times.

Table 5.5: Percentage distribution of GDP of the public health sub-sector, 2003 – 2007 Year Percentage distribution 2003 0.4

2004 0.4

2005 0.4

2006 0.4

2007 0.4 Source: NBS (Nigerian Statistical Fact Sheet, 2007:8)

Table 5.5 shows the analysis of the percentage distribution of the Gross

Domestic Product at constant basic prices in the health sector indicates a dismal

performance with a stagnant growth rate of 0.04% in 2003, 0.04% in 2004, 0.04%

in 2005, 0.04% in 2006, 0.04% in 2007.

5.8 Data Analysis

Table 5.6: Correlation Analysis of Percentage Increase/Decrease in Fuel Pump Price and GDP of the Health Sector

Year % increase/ decrease in fuel

pump price X

GDP of Health

Y

XY

X2

Y2

2003 29.57 0.04 1.18 874.38 0.0016

2004 19.00 0.04 0.76 361.00 0.0016

2005 11.90 0.04 0.48 141.61 0.0016

2006 0.00 0.04 0.00 0.00 0.0016

2007 11.25 0.04 0.45 126.56 0.0016

71.72 0.20 2.87 1503.55 0.01

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H0: There exist no significant positive relationship in the deregulation of the

downstream of the petroleum sector and the development of the public

health sector of the Nigerian economy.

H1: There exist a significant positive relationship in the deregulation of the

downstream of the petroleum sector and the development of the public

health sector of the Nigerian economy.

Level of significance = 0.05

2-nr-1

r t StatisticsTest 2

2222 ynxxn

xyn r Where

y

yx

n = the number of paired observations = 5

number of degrees of freedom = n – 2 = 5 – 2 = 3

0.003

3000004-1

0.002

3(0.002)-10.002 t

002.0

(0.20) - (0.01)5)71.71()55.1503(5(0.20) (71.72) - (2.87) 5 r

2.35 0.05(3)

t 0.05

2)-(n t table-t

2

22

Decision Rule: H0 is rejected if the calculated value of t is greater than its table

value, and accepted otherwise.

115

Conclusion: Since the calculated value of t= 0.003 is less than the table value of

t= 2.35. H0 is accepted, hence there is no significant positive relationship in the

deregulation of downstream of the petroleum sector and the development of the

public health sector of the Nigerian economy.

5.9 Discussion of Findings

Before the period of the study, the health sector was in a very bad shape,

like the road sector it was one of the critical sectors that the government was

making the argument for deregulation of the petroleum sector in order to

intervene. Despite the increase in budgetary allocations and most components of

health care spending, the health status of the average Nigerian and the condition

of health infrastructure has not improved appreciably. Also, the poor continue to

have a significant worse health status than the non poor and they (the poor)

should be more strongly affected by public spending on health care relative to the

non-poor. This could help reduce the difference in impact of spending between the

poor and the non poor to be less substantial. In Nigeria, the cost of medical

treatment is expensive. The absence of basic drugs in government hospitals has

turned patients acquire such drugs and services from private operators and

providers which further increases the cost.

In relation with the Vamed project, the hospitals required various degrees

of renovation and rehabilitation work preparatory to the installation of the Vamed

equipment. In this connection, some money had been allocated to each of the

hospitals. ABUTH, for example, was allocated the sum of N260 million for pre-

installation activities, followed in 2004 by another N50 million. The presidential

committee sent a team to ABUTH, JUTH, UCH to assess work progress. As at the

116

end of 2004, ABUTH and UCH had achieved 100% of pre-installation projects and

80% equipment installation. In the case of the Jos University Teaching Hospital,

work on the structure had not been completed to meet the requirements for

Vamed equipment installation. A sum of N200 million was allocated to it in 2004

for the Vamed project, but the amount was only accessed in March 2005 to get

the project underway after the Due Process conditions were met. Some of the

specific projects under the Vamed scheme include the completion of X-ray,

Radiology with a theatre annex, completion of ward blocks, completion of external

works for outpatient department and emergency buildings.

In 2005, N1.25 billion was released to the eight teaching hospitals to

carryout the pre-installation and general maintenance works, while each Teaching

Hospital was allocated Euro 7.9 for Vamed equipment. According to the

Presidential Implementation committee in collaboration with the Federal Ministry

of Health which monitored these projects. The projects reached various stages of

implementation. Out of the eight teaching hospitals, the renovations at UCH and

ABUTH were completed and commissioned by President Olusegun Obasanjo.

Out of the 20 projects which were to be executed by LUTH as a pre-condition for

the installation of Vamed equipment, 15 were completed as at the time of

inspection while the remaining 5 were on-going. Among them are the supply and

the installation of one chiller and one boiler with contract sum of N33.15m and

N36.95m respectively. Both projects were funded from the 2005 budget.

At the UPTH which has now relocated to the permanent site, the sum of

N156m which was allocated for its rehabilitation works in 2005 were fully released

accessed and utilized for completion of work at Block A. The works completed

include furnishing of administrative office, painting the interior and exterior of the

117

building. The UPTH and UMTH were to be commissioned before the end of 2006.

Vamed had supplied the required equipment to almost all the teaching hospitals

and were to be commissioned after installation. According to the study conducted

by an inter-ministerial committee led by the Federal Ministry of Finance on the

implementation of the 2005 budget concludes that the impact of the Vamed

project is already being noticed. With state of the art medical equipment now

installed and used in some of the hospitals, improved medical services are

available in the country partly reducing the need to travel abroad for specialist

services. In addition, the improved working environment has also served to

motivate local medical personnel and discourage the trend of brain drain. But it

has been discovered that most of the new equipments cannot be operated by the

personnel since they have not been well trained to handle them.

The call for increase government intervention in the health sector may be a

mere rhetoric. The country’s health system after more than 30 years of recurrent

reforms has witnessed serial policy somersaults. The health sector is still plagued

with inadequate diagnostic facilities, under funding and poor working conditions.

Although Vamed engineering was awarded contract to revamp teaching hospitals

across the country, yet, one of the pressing reasons why strikes persist in the

health sector is as a result of lack of basic diagnostic and other medical

equipment. The skeletal health system has forced wealthy Nigerians including

President Umaru Musa Yar’Adua, to seek medical treatment abroad. The Federal

Ministry of Health says Nigerians spend N32 billion yearly for medical treatment

abroad.

Whereas the developed countries boast of 1 physician for every 242 to 539

inhabitants, Nigeria fall far behind, with just one physician for every 3128 or more

118

of her citizens as observed in table 5.2 which reflects the demographic

characteristics of the Nigerian health sector. According to a World Health

Organisation report in Nigeria, life expectancy dropped from 53.8 years for

females and 52.6 years for males in 2004. The infant mortality rate rose from 87.2

per 1,000 live birth in 1990 to 104 in 2004. The maternal mortality ratio of 800 per

1,000 live births is one of the highest in the world. The disability adjusted life

expectancy of 38.3 years ranks 187th out of 191 countries. There is thus need to

support the public health system with enough funds and adequately trained

personnel.

119

CHAPTER SIX

SUMMARY, CONCLUSION AND RECOMMENDATIONS

6.1 Summary

The nation had been witnessing adequate supply and distribution of

petroleum products until 1986 when pricing became problematic due to the

introduction of the Structural Adjustment Programme with its attendant

consequence of devaluation of the naira. Since then, the problem of pricing has

been a perennial and vexing issue as price increase have become traumatic and

accompanied by public protests and strikes that have always taken its toll on the

Nigerian economy. Coupled with the non-maintenance of local refineries,

domestic production was undermined making it imperative for demand to be met

through imports.

The result is that currently, the local refining industry is characterized by

low capacity utilization, gross mismanagement, excessive unit operating cost and

bloated overheads, intolerable process losses, low productivity, sabotage and

inadequate technological input for necessary product and process upgrade. These

have combined to move the petroleum industry in a direction opposite to the

progressive march of the rest of the world. The shortages of petroleum products

have escalated in spite of increases in prices of petroleum products.

The claim of government is that, as happened in the telecommunications

sector, once private sector operators are given a relatively free hand, the sector

would become competitive, efficiency will be introduced, products will be available

at all times and, in the long-run prices will crash. The worry, however is that in the

short run, Nigerians will be subjected to the untold hardship that will come as a

120

result of government not having done what it should to create the environment

that is necessary for the policy to work without putting the people through pain.

The reported reasons for deregulation of the downstream of the petroleum

sector include the allegation that the petroleum subsidy scheme has been

characterized by inefficiency, indolence and corruption as well as the allegation

that huge amounts allocated to reviving the refineries have not produced desired

results. It must be clearly stated that part of the responsibility of government is to

ensure that its policies and programmes are efficiently run and that corruption is

checked. The contention of the NLC and the general public is that the price for

ineptitude of government should not be passed on to the populace. For the fact

that government has refused to prosecute those responsible for mismanaging the

funds for the unending turn around maintenance episodes in the refineries as well

as the refusal to arraign those officials and companies accused of abusing the

petroleum support fund calls a lot into question.

Nigeria has a combined refining capacity of 445,000 barrels per day and

consumes about 350,000 barrels of two million litres of fuel per day. This means

that the Nigerian National Petroleum Corporation (NNPC) through the local

refineries would have been in a position to satisfy local demand and have excess

products to export. The inability of government to refine enough products in the

country has led to mass importation of the products and the attendant cost of

freighting, ports charges and other handling expenses. It is this situation of an

inefficient system, brought about, largely, by corruption that consumers and other

helpless Nigerians are being asked to pay for.

These same embattled people, are further held hostage, by lack of good

roads, mass poverty, illiteracy, a comatose health sector, declining industrial

121

capacity and high inventory in the manufacturing sector. Other factors which

constrained growth in manufacturing production included the continued

deterioration in infrastructural facilities, especially power supply which resulted in

production stoppages and high operational cost. Given the high rate of

dependence on private energy generation by manufacturers and other producers,

necessitated by the unstable and unpredictable power supply and the near total

dependence on road transportation for the movement of goods and persons, it is

obvious that the cost of domestic production will escalate substantially as

petroleum products prices rise. Transporters involved in haulage business are

also increasing the burden of the manufacturers since the poor condition of the

roads is making it difficult to deliver goods without some extent of damage being

done to the goods.

From the foregoing, it has been observed point clear that this will lead to

further loss of competitiveness of domestic goods and services in the domestic

market. The implication of this will be collapsing domestic production and the

shutdown of domestic forms and factories. Shutdowns resulting in lay-offs will

continue to swell the ranks and increase unemployment. The goals of reducing

unemployment and poverty will not be achieved. The obvious result is that the

objective of growing the economy will become unrealizable.

In respect of the roads, the state of the roads is a narrative of poor maintenance.

The roads are collapsing and dangerous to ply with deadly spots some which are

inaccessible in different parts of the country. In a review of the 2006 budget, the

federal government had earmarked 73 billion Naira to be appropriated for capital

works for the construction, rehabilitation and repair of roads nationwide. The

outlook was even more optimistic in the 2007 budget as the allocation for works

122

was 191 billion Naira which amounts to 110% increase of the previous year. The

Federal Roads Maintenance Agency ( FERMA ) was also provided money for jobs

to be done. The problem about the state of the roads is that although so much has

been spent on them, yet the condition gets worse in so many places.

On the whole the state of the Nigerian public health sector can be summed

up thus; that it is characterized by lack of sufficient government funding which has

resulted in poor infrastructural development with insufficient facilities to meet the

increasing demand for health care by the teeming population. There is also a high

degree of inequality in the health care delivery system as it is affordable only to a

few who can afford while the rich still insist on travelling to obtain proper medical

care. This of course has led to insufficient foreign investment in the sector due to

low confidence on growth prospects by investors except for the participation of

voluntary organizations and agencies such as the World Health Organisation,

UNICEF and UNESCO.

6.2 Conclusion

From the findings of the research, it can be observed that the reforms

carried out by the Federal government in the petroleum sector through

deregulation has not yielded positive effects in both the road transport and public

health sectors in the Nigerian economy. Suffice it to say that the condition of the

road transportation sector in Nigeria still remain comatose with the roads still in a

deplorable condition. Though the government has expended huge sums of money

for construction and rehabilitation of roads, this has not yielded positive dividends.

Government must therefore ensure that road contracts are not necessarily

given out to government officials for political patronage. Efforts must be made to

123

ensure that road contracts are executed according to specifications in the contract

which should also take into consideration the volume and weight of vehicles that

ply such roads. At the same time government must also ensure that the due

process is strictly adhered to in the award of road contracts to competent and

deserving road construction companies.

The state of the roads has been a bane to passengers and commuters who

travel in these roads. This is occasioned by the fact that road travelers may

sometimes have to spend longer time to complete their journey due to the

deplorable condition in the roads. Cost of travelling on bad routes could also be

high as vehicle owners will charge more fares to be used in the maintenance of

the vehicles. Sometimes passengers are stranded due to heavy duty vehicles and

trucks which might fall at the bad spots which often time block the roads and make

it impassable. Also, such occurrences such as road accidents and arm robbery

attacks are a common phenomenon due to the bad roads and this has led to loss

of several lives and properties.

On the public health sector, the health status of the average Nigerian and

the condition of the health infrastructure has not improved considerably. The

situation becomes worse in the case of the poor who cannot afford the cost of

treatment sometimes offered in the private health facilities. The available

infrastructure is inadequate and are ill equipped with inadequate diagnostic

facilities. Another major problem has been that of funding as the workers are

always threatening to go on strike as a result of the poor working conditions.

Generally there is the absence or lack of basic drugs in these government owned

hospitals which compounds the situation the more.

124

The provision of equipment through the Vamed Intervention has been very

selective in just about eight teaching hospitals across the country. This

intervention should be in a large scale across various hospitals in the country.

While the poor remuneration of health personnel has not only led to strike in the

sector but loss of these personnel who travel abroad in search of greener

pastures. This has also made them to go into private practice side by side with

their work in the government hospitals. Needless to say that this of course is at

the detriment of the public hospitals as much attention and focus is given to their

private practice than that of the government.

The spread of diseases such as HIV AID is on the increase, infact mortality

rate and the maternal mortality ratio in Nigeria rank among the highest in the

world. While the life expectancy has been on the slide. Government ought to

conduct a more serious intervention in order to save the lives of Nigerians who

cannot afford the high fees charged in private hospitals or travel abroad for

Medicare.

6.3 Recommendations

In line with the findings of this research, the following suggestions or

recommendations were made:

On deregulation of the downstream of the petroleum sector

Government should not seek to privatise the refineries and deregulate the

downstream on the reasons that the petroleum subsidy scheme has been

characterized by in efficiency and corruption as well as the allegation that that the

huge amounts allocated to reviving the refineries have not produced the desired

results. It is the responsibility of government to ensure that its policies and

125

programmes are efficiently run and that corruption is being checked. Government

therefore ensure that all the officials and companies involved in corruption by

abusing the petroleum support fund and abuse of the subsidy scheme are

arraigned and prosecuted in the law courts. Also the contractors and officials

responsible for frustrating and mismanaging the funds which has led to the

unending turn around maintenance episode in the refineries should also be

brought to book.

The national refining capacity of the four refineries must be improved while

Turn Around Maintenance should be carried on them periodically. Government

should also ensure more refineries are built to increase production and also stop

importation as this will lead to the importation of petroleum products. The Bureau

of Public Enterprises must not only ensure that public properties are sold at give

away prices to individuals that the government should reclaim these companies

and punish those that have been responsible for running them down which will

also serve as a deterrent to others.

Given the state of social services and infrastructure, government should

suspend the idea of deregulation as this will lead to increase in prices of products

which triggers the increase in cost of fares and other essential services and

therefore increases hardship on the already impoverished Nigerians.

On The Road Transport Sector

Government must ensure that it monitors the execution and implementation

of road contracts and also prosecute erring contractors for non delivery or poor

delivery of jobs. The government should also be guided by volume of traffic and

126

weight or tonnage of vehicles to ensure that the quality of roads built will stand the

test of time.

The Federal Road Maintenance Agency must be properly equipped in

order to realize the task of repairing and fixing the nation’s highways. The FERMA

must be adequately supervised to ensure transparency and accountability in the

operational funds for high way maintenance it draws from petroleum products

pricing after the abolishing of the toll gates.

Also the bad portions on the roads must be fixed immediately, they should

not be allowed to deteriorate so as not to cause accidents and hold ups which

can also be used by robbers and criminals to rob and disposes unsuspecting road

users of their money and other personal effects.

On The Public Health Sector

Government should increase funding of the health sector by improving

equipments as well as the infrastructure and also subsidize health care delivery in

order to ensure that poor people and majority of Nigerians can have access to it.

Government should also ensure that drugs are provided in hospitals at reduced

cost in order to ensure it affordability.

The Vamed intervention project in the eight tertiary institutions should be

extended to other teaching hospitals, medical institutions and hospitals around the

country so as to ensure even and more spread. Also the Vamed equipments

installed at the teaching hospitals must be monitored, supervised and upgraded

periodically to ensure that they do not malfunction or become obsolete.

Medical personnels should be sent for training to enable them to manage

and operate the newly installed Vamed equipments effectively. While improved

127

working conditions and environment must be guaranteed to medical personnel to

discourage the tide of brain drain and also stem the incessant and rampant cases

of strikes in the nation’s medical institutions which has often lead to casualties

and loss of live.

128

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135

APPENDIX 1

Department of Political Science University of Nigeria Nsukka 11th March, 2010

Sir/Madam,

INTERVIEW FOR A RESEARCH STUDY

I am a postgraduate student of the above University and department. I am

currently carrying out a study on “The Effects of Rolling Back of State on

Development of Nigerian’s Political Economy”. The study is purely an academic

exercise aimed at examining the impact of deregulation of the downstream of the

petroleum sector on the development of the road transport sector.

As an employee of this company, I believe that you are in a better position

to provide some useful information that will assist in this research work. Thus I feel

the study cannot be accomplished without your opinion on some of the questions

raised on this topic.

However, the information obtained from you will only be utilized for the

purpose stated here, and so, will be treated in strict confidence. Your name and

personal identity may not be required in responding to the questions.

Please the questions are directed toward understanding the objectives of

the study. Your fairness in responding to the questions will add relevance to the

study.

Yours faithfully

Ndifreke S. Umo-Udo

136

SECTION A

(A) Name:………………………………………………………………………………

(B) Transport Company: ……………………………………………………………..

(C) Rank: ……………………………………………………………………………….

(D) Department:………………………………………………………………………..

SECTION B

1. What type of petroleum product do you use for your vehicles? (a) Premium Motor Spirit (PMS) – Petrol (b) Automotive Gas Oil (AGO) – Diesel

2. Which one of these products do you think is more economical in terms of

price and usage? (a) Premium Motor Spirit (PMS) – Petrol (b) Automotive Gas Oil (AGO) – Diesel

3. How do you source for these petroleum products?

(a) Obtained wholesale from NNPC Depot (b) Obtained from retail outlets

4. What effects do you think increase and decrease in the pump price of

petroleum products will have on road transportation? (a) Increase in the cost of transportation (b) Reduction in the number of people travelling and number of vehicles

plying the roads

5. What other reasons will you give for increase in the cost of road transport fare? Specify:…………………………………………………………………………….. ……………………………………………………………………………………….

137

138

139

140

141

APPENDIX III

142

143

144

145

137

APPENDIX VI OPERATIONAL LOGIC OF EMPIRICAL RESEARCH

VARIABLE I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

S/N Question/problem

What is to be measured (normal, ordinal, interval, ratio)

What are the existing (measures or relevant measures that exist

What is the gap to be filled if the existing answers are not correct

What theory or concept can explain the problem

Hypothesis Variables in the hypothesis

Empirical indicators of the

link terms or variables in the

hypothesis

Empirical indicators of the major variables,

their location sources

Population of empirical

indicators/and carriers of the empirical

indicators

Samples of

empirical indicators

Design for gathering the data on the indicators

Methods of data

collection on the

empirical indicators of the variables

Methods of analysis of the

data on the empirical

indicators of the variables

1. Was there any significant positive relationship in the deregulation of downstream of the petroleum sector and the development of the road transportation and the public health sectors of the Nigeria economy

Interval measures shall be used to measure the variations in price adjustment between the period 2003 to 20007 Nominal measures of deregulations in terms of the names of certain price adjustments overtime, as independent variable against nominal, ordinal interval ratio of road transportation in terms of number of roads built, maintained,

That deregulation has not led to any serious growth or has no significant positive impact in the development of the road transport and public health sectors of the Nigeria economy

The gap to be filled is to verify the claim of development if any, at least in the road transport and the public health sectors of the economy

The Marxist theory of social production, which explains that members of the society enter into social relationships with each other for the purpose of production. These social relationships, instead of being a help to the productive powers of the society, becomes fetters upon them.

Hi: There exist a significant positive relationship in the deregulation of the downstream of the petroleum sector and the development of the road transport and public health sectors of the Nigerian economy Ho: There exist no significant positive relationship in the deregulation of the downstream of the petroleum sector and the development of the road transport and public health sectors of the economy.

1. Independent (x) Deregulation of the petroleum sector 2. Dependent (y) development of the road transport and public health sectors of the Nigerian economy.

“Significant positive relationship” a considerable level of increase impact in the extent of growth and development of these two sectors of the economy.

Removal of subsidy from petroleum products denoted by the increase and adjustments in the price of petroleum products e.g. Fuel at the following prices N 26 – 40 40 – 34 34 – 42 42 – 49.9 49.9 – 50.5 50.5 – 65.0 65.0 – 75.0 75.0 – 70.0 The ministry of petroleum resources office of the SGF, the NNPC headquarter and the petroleum products regulatory agency.

The totality of the various decision made by the government on the deregulation of the downstream of the petroleum sector between the period 2003-2007 on the increase and adjustment in the pump price of petroleum products. The decisions of N 20June,2003, 26-40 9 July, 2003,40-34 1 Oct. 2003, 34-42 29 May, 2004, 42-49.9 1 Jan. 2005,49.9-50.5 26 Aug. 2005, 50.5-65.0 24 May, 2007, 65.0-75.0 23 June, 2007, 75.0-70.0 The Ministry of petroleum resources, office of the secretary to the government of the federation, NNPC headquarters and the PPRA.

The samples shall be drawn from the various decision made on deregulation of the downstream of the petroleum sector between the periods 2003 – 2007

The time series design denoted by O1 O2 O3 O4 X O5 O6 O7 O8

Observation of statistical records and

other official

records of the

government and

regulatory agencies on

the deregulation

of the downstream

of the petroleum

sector. Such as

increase and adjustment

in pump prices of

petroleum products as well as the refineries

and depots

Simple percentage method and

analysis shall be used to analyze the percentage increase or

decrease in the price

adjustments of fuel prices

between 2003 to 2007.

138

Variables 1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 S/N Question/

problem What is to be measured (normal, ordinal, interval, ratio)

What are the existing (measures or relevant measures that exist

What is the gap to be filled of the existing answers are not correct

What theory or concept that can explain the problem

Hypothesis Variables in the hypothesis

Empirical indicators of the link terms or variables in the hypothesis

Empirical indicators of the major variables, their location sources

Population of empirical indicators/and carries of the empirical indicators

Samples of empirical indicators

Design for gathering the data on the indicators

Methods of data collection on the empirical indicators of the variables

Methods of analysis of the data on the empirical indicators of the variables

1. Was there any significant positive relationship in the deregulation of downstream of the petroleum sector and the development of the road transportation and the public health sectors of the Nigeria economy

Ordinal measurement shall be used to measure the information on the trend of the prices of products in various parts of the country. Fares paid, changes in fares upwards or down wards;

That deregulation has not led to any serious growth or has no significant positive impact in the development of the road transport and public health sectors of the Nig. economy

The gap to be filled is to see how the claim of development can be substantiated at least in the road transport and the public health sectors of the economy

The Marxist theory of social production, which explains that members of the society enter into social relationships with each other for the purpose of production. These social relationships, instead of being a help to the productive powers of the society, becomes fetters upon them.

Hi: There exist a significant positive relationship in the deregulation of the downstream of the petroleum sector and the development of the road transport and public health sectors of the Nigerian economy

Ho: There exist no significant positive relationship in the deregulation of the downstream of the petroleum sector and the development of the road transport and public health sectors of the economy.

1. Independent (x) Deregulation of the petroleum sector 2. Dependent (y) development of the road transport and public health sectors of the Nigerian economy.

“Significant positive relationship” a considerable level of increase impact in the extent of growth and development of these two sectors of the economy.

The variations in prices by marketers of petroleum products such as petrol, diesel and kerosene in different parts of the country.

The totality of the various decision made by the government on the deregulation of the downstream of the petroleum sector between the period 2003-2007

Major and minor filling stations

The time series design denoted by O1 O2 O3 O4 X O5 O6 O7 O8

Observation of document evidence and content analysis as well interview to obtain data or information from marketers and distributors on the reasons for the arbitrary increase in the cost of petroleum products.

Simple percentage

shall be used to analyze

the information on the trend of the prices of products

in the different

parts of the country.

139

Variable 1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 S/N Question/problem What is to be

measured (normal, ordinal, interval, ratio)

What are the existing (measures or relevant measures that exist

What is the gap to be filled of the existing answers are not correct

What theory or concept can explain the problem

Hypothesis Variables in the hypothesis

Empirical indicators of the link terms or variables in the hypothesis

Empirical indicators of the major variables, their location sources

Population of empirical indicators/and carries of the empirical indicators

Samples of empirical indicators

Design for gathering the data on the indicators

Methods of data collection on the empirical indicators of the variables

Methods of analysis of the data on the empirical indicators of the variables

1. Was there any significant positive relationship in the deregulation of downstream of the petroleum sector and the development of the road transportation and the public health sectors of the Nigeria economy

Nominal and ratio measurement shall be used to measure the information on the sale of the refineries

That deregulation has not led to any serious growth or has no significant positive impact in the development of the road transport and public health sectors of the Nig. economy

The gap to be filled is to see how the claim of development can be substantiated at least in the road transport and the public health sectors of the economy

The Marxist theory of social production, which explains that members of the society enter into social relationships with each other for the purpose of production. These social relationships, instead of being a help to the productive powers of the society, becomes fetters upon them.

Hi: There exist a significant positive relationship in the deregulation of the downstream of the petroleum sector and the development of the road transport and public health sectors of the Nigerian economy Ho: There exist no significant positive relationship in the deregulation of the downstream of the petroleum sector and the development of the road transport and public health sectors of the economy.

1. Independent (x) Deregulation of the petroleum sector 2. Dependent (y) development of the road transport and public health sectors of the Nigerian economy.

“Significant positive relationship” a considerable level of increase impactin the extent of growth and development of these two sectors of the economy.

Sale of refineries, jetties, flow and pumping stations, depots to only a few people and possibly government officials or their agents. Refineries in Port Harcourt, Warri and Kaduna. Jetties in and depots in Lagos, Okrika, warri and Calabar etc.

4 refineries 24 pump stations 22 storage depots. 2 refineries vessels 5 jetties NNPC and the Pipelines and product marketing company PPMC.

4 refineries Jetties and storage depots sold or bought by govt on state agencies

The time series design denoted by O1 O2 O3 O4 X O5 O6 O7 O8

Observation of documentary evidence on sale of refineries. Observation of statistics of receipt or sale of the refineries, depot and jetties.

Analysis of the price averages and percentage increase or decrease and the range shall be compared to their actual value they were sold.

140

Variable II

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 S/N Question/problem What is to

be measured (normal, ordinal, interval, ratio)

What are the existing (measures or relevant measures that exist

What is the gap to be filled of the existing answers are not correct

What theory or concept can explain the problem

Hypothesis Variables in the hypothesis

Empirical indicators of the link terms or variables in the hypothesis

Empirical indicators of the major variables, their location sources

Population of empirical indicators/and carrier of the empirical indicators

Samples of empirical indicators

Design for gathering the data on the indicators

Methods of data collection on the empirical indicators of the variables

Methods of analysis of the data on the empirical indicators of the variables

1. Was there any significant positive relationship in the deregulation of downstream of the petroleum sector and the development of the road transportation and the public health sectors of the Nigeria economy

Ordinal level of measurement shall be used to analyze the data on road construction. Ratio shall also be used to measurer the level of increase or decrease in gaofall budget for road transport sector between the period 2003 to 2007.

That deregulation has not led to any serious growth or has no significant positive impact in the development of the road transport and public health sectors of the Nig. economy

The gap to be filled is to see how the claim of development can be substantiated at least in the road transport and the public health sectors of the economy

The Marxist theory of social production, which explains that members of the society enter into social relationships with each other for the purpose of production. These social relationships, instead of being a help to the productive powers of the society, becomes fetters upon them.

Hi: There exist a significant positive relationship in the deregulation of the downstream of the petroleum sector and the development of the road transport and public health sectors of the Nigerian economy Ho: There exist no significant positive relationship in the deregulation of the downstream of the petroleum sector and the development of the road transport and public health sectors of the economy.

1. Independent (x) Deregulation of the petroleum sector 2. Dependent (y) development of the road transport and public health sectors of the Nigerian economy.

“Significant positive relationship” a considerable level of increase impact in the extent of growth and development of these two sectors of the economy. The prices charged, the cost,

Number Of Roads Constructed Rehabilitated and Reconstructed for the Movement Of Goods And Services Across The Country. Gross Domestic Product Of The Road Transport Sector Over The Period 2003 – 2007 Ministry of Works, FERMA, CBN and Ministry of Finance

Total number of roads maintained by the federal and state governments The ministry of works, housing and urban development. Federal roads maintenance Agency (FERMA)

Observation of one major federal road from each of the six geo-political zone

The time series design denoted by O1 O2 O3 O4 X O5 O6 O7 O8

Capital budget expenditure for roads construction by the federal government from 2003 to 2007.

Analysis of observed documented evidence. Correlation of the percentage increase or decrease in the pump price of fuel and the percentage of GDP on road sector shall be used for the analysis.

141

Variable II

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 S/N Question/problem What is to be

measured (normal, ordinal, interval, ratio)

What are the existing (measures or relevant measures that exist

What is the gap to be filled of the existing answers are not correct

What theory or concept can explain the problem

Hypothesis Variables in the hypothesis

Empirical indicators of the link terms or variables in the hypothesis

Empirical indicators of the major variables, their location sources

Population of empirical indicators/and carries of the empirical indicators

Samples of empirical indicators

Design for gathering the data on the indicators

Methods of data collection on the empirical indicators of the variables

Methods of analysis of the data on the empirical indicators of the variables

1. Was there any significant positive relationship in the deregulation of downstream of the petroleum sector and the development of the road transportation and the public health sectors of the Nigeria economy

Ordinal level of measurement shall be used to assess the data on road transport fares and changes in fares.

That deregulation has not led to any serious growth or has no significant positive impact in the development of the road transport and public health sectors of the Nig. economy

The gap to be filled is to see how the claim of development can be substantiated at least in the road transport and the public health sectors of the economy

The Marxist theory of social production, which explains that members of the society enter into social relationships with each other for the purpose of production. These social relationships, instead of being a help to the productive powers of the society, becomes fetters upon them.

Hi: There exist a significant positive relationship in the deregulation of the downstream of the petroleum sector and the development of the road transport and public health sectors of the Nigerian economy Ho: There exist no significant positive relationship in the deregulation of the downstream of the petroleum sector and the development of the road transport and public health sectors of the economy.

1. Independent (x) Deregulation of the petroleum sector 2. Dependent (y) development of the road transport and public health sectors of the Nigerian economy.

“Significant positive relationship” a considerable level of increase impact in the extent of growth and development of these two sectors of the economy. Through availability of good roads and stability of fares for affordable and cheap transportation.

Access or availability of mass transit vehicles at cheap and affordable rates for the movement of goods, services and commuters over the period 2003 – 2007

Mass transit companies involved in the business of road transportation in the country

Samples shall be drawn from fares schedule of mass transit companies e.g. the Akwa Ibom state mass transit company limited etc OR Statistics of road transport fares in Nigeria.

The time series design denoted by O1 O2 O3 O4 X O5 O6 O7 O8

Interview method and schedule of fares on inter-city routes from the period 2003 to 2007.

Simple percentage method shall be used to analyze the data

142

Variable II

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 S/N Question/problem What is to be

measured (normal, ordinal, interval, ratio)

What are the existing (measures or relevant measures that exist

What is the gap to be filled of the existing answers are not correct

What theory or concept can explain the problem

Hypothesis Variables in the hypothesis

Empirical indicators of the link terms or variables in the hypothesis

Empirical indicators of the major variables, their location sources

Population of empirical indicators/and carries of the empirical indicators

Samples of empirical indicators

Design for gathering the data on the indicators

Methods of data collection on the empirical indicators of the variables

Methods of analysis of the data on the empirical indicators of the variables

1. Was there any significant positive relationship in the deregulation of downstream of the petroleum sector and the development of the road transport and the public health sectors of the Nigeria economy

Ordinal and interval level of measurement shall be used to assess the data on statistical records of public health institutions. Ratio shall be used to measure the level of approved estimates in the budget for the health sector from 2003 to 2007.

That deregulation has not led to any serious growth or has no significant positive impact in the development of the road transport and public health sectors of the Nig. economy

The gap to be filled is to see how the claim of development can be substantiated at least in the road transport and the public health sectors of the economy

The Marxist theory of social production, which explains that members of the society enter into social relationships with each other for the purpose of production. These social relationships, instead of being a help to the productive powers of the society, becomes fetters upon them.

Hi: There exist a significant positive relationship in the deregulation of the downstream of the petroleum sector and the development of the road transport and public health sectors of the Nigerian economy Ho: There exist no significant positive relationship in the deregulation of the downstream of the petroleum sector and the development of the road transport and public health sectors of the economy.

1. Independent (x) Deregulation of the petroleum sector 2. Dependent (y) development of the road transport and public health sectors of the Nigerian economy.

“Significant positive relationship” a considerable level of increase impact in the extent of growth and development of these two sectors of the economy. Through improved capital budgetary allocation to the health sector

Capital budget expenditure for ministry of health Grass domestic product of the Health sector over the period 2003 – 2007 Ministry of Finance

Total amount of money budgeted for capital projects for the ministry of health by the federal government from 2003 to 2007.

Samples shall be drawn from the period 2003-2007

The time series design denoted by O1 O2 O3 O4 X O5 O6 O7 O8

Observation of documentary evidence, evidence, statistical records of government on budget allocations for the public health sector.

Simple percentage shall be used to analyze the increase and decrease in the budgetary estimates and allocations to the public health sector Correlation the percentage increase or decrease in the pump price of fuel and the percentage of GDP on health shall be used for analysis

143

Variable II

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 S/N Question/problem What is to

be measured (normal, ordinal, interval, ratio)

What are the existing (measures or relevant measures that exist

What is the gap to be filled of the existing answers are not correct

What theory or concept can explain the problem

Hypothesis Variables in the hypothesis

Empirical indicators of the link terms or variables in the hypothesis

Empirical indicators of the major variables, their location sources

Population of empirical indicators/and carries of the empirical indicators

Samples of empirical indicators

Design for gathering the data on the indicators

Methods of data collection on the empirical indicators of the variables

Methods of analysis of the data on

the empirical indicators of the variables

1. Was there any significant positive relationship in the deregulation of downstream of the petroleum sector and the development of the road transport and the public health sectors of the Nigeria economy

Ordinal and interval level of measurement shall be used to assess the data on statistical records of equipments and infrastructural improvement at eight major teaching hospitals across the country

That deregulation has not led to any serious growth or has no significant positive impact in the development of the road transport and health sectors of the Nig. economy

The gap to be filled is to see how the claim of development can be substantiated at least in the road transport and the public health sectors of the economy

The Marxist theory of social production, which explains that members of the society enter into social relationships with each other for the purpose of production. These social relationships, instead of being a help to the productive powers of the society, becomes fetters upon them.

Hi: There exist a significant positive relationship in the deregulation of the downstream of the petroleum sector and the development of the road transport and public health sectors of the Nigerian economy Ho: There exist no significant positive relationship in the deregulation of the downstream of the petroleum sector and the development of the road transport and public health sectors of the economy.

1. Independent (x) Deregulation of the petroleum sector 2. Dependent (y) development of the road transport and public health sectors of the Nigerian economy.

“Significant positive relationship” a considerable level of increase impact in the extent of growth and development of these two sectors of the economy. Through the equipping of hospitals for provision of drugs and good health care delivery

Increase in the number of infrastructure for improved health care services

8 teaching hospitals with the federal government initiative aimed at improvement of infrastructure in the teaching hospitals.

Samples shall be drawn from at least 4 out of the 8 teaching hospitals earmarked for the improvement of infrastructure

The time series design denoted by O1 O2 O3 O4 X O5 O6 O7 O8

Ministry of health and the agency or hospitals, Federal Ministry of Finance.

Observation of documentary evidence on the initiative for improvement of infrastructure in the teaching hospitals