EFFECTS OF UNIFORM PRICING POLICY IN THE MARKETING OF PETROLEUM PRODUCTS IN NIGERIA

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Abstract

The aim of this study is to examine and determine the effects of uniform pricing policy in the marketing of petroleum products in Nigeria. Data were collected from primary and secondary data. The major data collection instrument is the questionnaire. The data were presented in table as frequency distribution and analyzed with frequencies and percentage. Having analyzed the data, findings were made: The existing pricing policy has resulted in uniform prices by the “Big 8” and different prices by independent marketers. The effects of the uniform pricing include: shortage of supplies relative to demand, diversion, bunkering and hoarding of petroleum products. Base on the findings the researcher therefore made the following recommendation. Firstly that the down sector should also be completely deregulated. More independent marketers should be given license to import and market the petroleum products. The government should create an enabling environment for this purpose. Foreign exchang

INTRODUCTION

1.1  BACKGROUND OF THE STUDY

Frequent charges in the prices of petroleum products, have a regular feature of the oil sector in Nigeria the price of petroleum products have been reviewed upward trice in Nigeria between 1999 and 2003 (Eze, 2003:7). Pricing of petroleum products had been the responsibility of the petroleum product pricing regulatory Agency (PPPRA) of Nigerian

The NNPC was established in 1977 to put the government in front seat in the oil industry.  From then the government ceased to be a mere regulatory agency.  Through the NNPC, the government delved into exploration, drilling and marketing of petroleum products in Nigeria (Ugbaja 2001: 8).  To facilitate this, the pipeline and product marketing company (NNPC) and petroleum product pricing Regulatory Agency (PPPRA) were established to regulate the pricing, distributing and marketing of petroleum products in Nigeria.

Prior to the deregulation of petroleum product pricing in the PPPRA and the NNPC ensured uniform pricing for all petroleum products through out in Nigeria.  For instance in 1989 the Babangida administration through these agencies raised the pump price of fuel, one of the petroleum products to N6.00 per liter. This was also further raised to N13.00 per liter by the Abacha regime in 1996.

In 2001, the Obasanjo administration increased it to N19.00 and further to N26.00 in 2002.  In 2003, it was again raised form N26.00 to N34.00, and in 2004. Currently was increased to N97.00 per liter after the subsidy remover by President Goodluck Jonathan.

Uniformity in the pricing of petroleum products throughout the country had been ensured and sustained because of the control and the regulation of the industry by the government agencies the current proposals of the deregulation of the oil sector will not only bring about heterogeneity in the prices of these product but will also bring about wholesome activities in the marketing of these products (Nwala, 2003:9).

Before the deregulation of petroleum product pricing, the marketing of the petroleum products were undertaken by eight (8) companies: Agip, Texaco, Elf, Total, Unipetrol, Mobil, National African petroleum and National.  These companies maintained uniform prices of the various emergence of the numerous petroleum products markets in recent time have changed the situation it is against this background that this study is set to examine the impact of uniform pricing of petroleum products in Nigeria.

 

 

1.2  STATEMENT OF PROBLEM

The deregulation of petroleum products prices recently was necessitated by the problems of uniform pricing of the products.  Among these problems are:

• Inadequate supply of the products to marketers by the refineries.
• Hoarding of the products by the marketers in the refineries.
• Product diversion by marketers to undesignated destinations.
• Increase demand of the products in the country.

 

1.3  OBJECTIVES OF THE STUDY

The purpose of this study is to determine the impact of uniform pricing of petroleum product in Nigeria.  Thus, the objectives of the study are:

1. To examine, the trend in petroleum products pricing in Nigeria
2. To examine factors influencing petroleum products prices.
3. To determine the effects of uniform prices for petroleum products.
4. To identify the problems of uniform prices petroleum products.
5. To suggest ways of ensuring efficient pricing of petroleum products prices.

 

1.4  HYPOTHESIS

The following questions are formulated for the purpose of this study.

Ho:  Uniform prices for petroleum products does not ensure efficiently marketing of the products.

Hi:   Uniform prices for petroleum products ensure efficiently marketing of the products.

Hypothesis 2

Ho:  Deregulation of downstream sector will not improve the pricing system for petroleum products

Hi:   Deregulation of down stream sector will improve the pricing system for petroleum products.

 

1.5  SIGNIFICANCE OF THE STUDY

The usefulness of the findings and recommendations to the government, its petroleum product marketing agencies and students.

Firstly, the government will through the findings of this study understand the biting effects of the current pricing policy for petroleum products on the consumers.  The recommendations will help in formulating pricing policies that will make the marketing efficient.

Secondly, the petroleum product pricing agency (PPPA) will through this study see the need to be more efficient In the fixing of petroleum product prices in spite of the proposed deregulation of the prices, influencing the prices will reduce the exploitative tendency of the markets.

Again, the Nigerian national petroleum corporation (NNPC) and all independent petroleum product marketers will see the need to cooperate with the government and NNPC will ensure efficient pricing policy and marketing of the products.

Finally, the study will be useful for academic purpose, it will serves as a data back to all students and researchers earring out a related study in future.  The study will also provide the basis for further studies through the findings.

 

 

 

1.6  SCOPE OF THE STUDY

The study focuses on uniform pricing of petroleum products and it’s implications in the Nigerian economy. The researcher encountered problems on various levels.

The reference materials were mostly classified document of the government and not every office was to let them out. In many cases, the researcher was told to obtain a letter of identification from her head of department before such classified document or information were accessed.

 

1.7  LIMITATIONS OF THE STUDY

The following constraints were encountered:

1. Uncooperative attitude of some individuals: Some of the Nigerian National petroleum independent petroleum marketers refused to complete the questionnaires or to be interviewed, this affected the volume of primary information available for the study.
2. Inadequate Finance: The study could have been more extensive of the researchers included other independent marketers outside Enugu metropolis in the study. But the researcher did not have enough funds for such an extensive study.
3. Time constraint: Because of the demand placed on the researcher by other academic activities, the researcher did not have ample time for the study. Thus, the study could not accomplish within a recorded time.

1.8  DEFINITION OF TERMS

Upstream sector: This refers to the drilling and refining section of petroleum processing activities.

1. Down Stream Sector: This refers to the distributive and marketing section of petroleum products.
2. Uniform Pricing: This refers to the phenomenon of fixing the same price for each of the petroleum products In the marketers.
3. Deregulation: This refers to the system of allowing the supply and demand for product prices to determine their relative prices.
4. NNPC: This is an acronym for Nigerian National Petroleum Corporation.
5. PPPA: This is an acronym for petroleum products pricing Agency.
6. PPMC: This is an acronym for pipeline products marketing company.