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Deregulation Policy

  • Adeoye O. Akinola
Chapter
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Part of the African Histories and Modernities book series (AHAM)

Abstract

This chapter interrogates the concept of deregulation with a view towards the real pressures generated by democratization and globalization. The quest for deregulation of the oil sector is examined in historical exposition with a costs-benefits analysis of the deregulation of the Nigeria’s economy. The chapter engages in the discourse, necessity, and understanding of deregulation under the classical liberalism, radical political economy and the regime consolidation school of thoughts. The chapter revealed the challenges of liberal governance in an oil-rich country and examined the contradictions of implementing the deregulation of essential public services in an impoverished society like Nigeria. Although, deregulation remains important in expanding the economic base of societies and ensuring effective service delivery; however, the inherent contradictions it generates strengthened the positions of protagonists of the neo-liberal ideology.

Keywords

Deregulation Democratization Classical liberalism Radical political economy Nigeria 

3.1 Introduction

Studies on the deregulation of the Nigerian oil sector mostly focus on oil governance and bureaucratic performance without paying required attention to the impact of globalization and democratization on the socio-political environment in which Nigeria’s public officials make decisions concerning the operation of the oil industry. In general terms, the literature is exhaustive on the connection between globalization and democratization (Kura 2005; Rudra 2005; Grugel 2003; Chua 2002; Li and Reuveny 2003), the convergence between economic reform and democracy (Uzodike 1996), the political economy of oil governance (Gboyega et al. 2011; Eme and Onwuka 2011), the cost-benefits of deregulation of the downstream oil sector (Kupolokun 2004, 2005), and the underdevelopment of emerging democracies (Frank 2004; Ake 1981; Amin 1999). This chapter moves beyond these analyses to reconcile the intellectual interface between globalization, democratization, deregulation of the Nigerian downstream oil sector, and the quest for sustainable development. It places deregulatory policies in the context of the fact that Nigeria is an oil-rich developing economy.

Scholars and policymakers seek to over-exaggerate the supra-nationalism of globalization and downplay the continued relevance of the choices that states possess to regulate capital allocation in the national domain. The level of these choices depends on state resources and the influence of MNCs involved. Without overlooking the dominance of the present global order and influence of global actors on state behaviour, Smith posits that:

If government caves in under pressure from multinational corporations over investment rights, environmental regulation, or food production, it is because they choose to favour corporate interests, not because they are subject to the natural laws of the international order. (Smith 2003, p. 133)

It is however important to stress the fact that the international order has not been propelled by natural laws. The capitalist major powers and their agencies are the steering wheel dictating the propulsion and direction of globalization. Deregulation policy has become one of the conditions for the expansion of global capital and surrendering of state sovereignty on economic governance to market forces.

3.2 Deregulation Policy

Deregulation falls under the broad categorization of reform. Reform could mean “improvement, re-organization, restructuring, modification, transformation, alteration, amendment, overhauling, restoration, change, and adjustment, among others”, and a mechanism used “to restore an organization when it has degraded from what it was originally designed to be” (Olaopa 2011, p. 2). The “iron wall” that divides the twin concepts of liberalization—deregulation and privatization—is very thin; they are occasionally used interchangeably in some contexts but there are some levels of distinction between the two modes of economic policy.1 Liberalization as a neo-liberal economic reform refers to the slackening of governmental controls over businesses. This ensures that businesses have more freedom to take decisions and can enter new areas with the least intervention from government. The major intent of liberalization is to dismantle the excessive regulatory framework that serves as a shackle on freedom of enterprise, freeing large-scale corporate interests from political and bureaucratic controls.

Godwin and Dagogo (2011) feel strongly that deregulation of a state’s economy could be conceptualized through three closely-knit concepts: privatization, divestiture, and marketization of the economy. However, Umezurike (2012, p. 53) defines privatization as the process of gradual ceding to the private sector of such public enterprises which by nature and type of operations are best performed by the private sector. Privatization and public sector reform marks what has been termed “second generation” adjustment policies, an attempt at distinguishing them from “first generation” policies which focused almost exclusively on economic stabilization propagated by SAP in Nigeria.2

The concept of privatization still suffers from a lack of clear-cut understanding despite the vast literature on the subject. It has become a generic term often used to describe a range of policy initiatives designed to alter the mix in ownership and management of enterprises away from government in favour of the private sector. It covers a continuum of possibilities from decentralization to market discipline. Narrowly defined, privatization implies permanent transfer of control—and consequential change of ownership rights—from the public to the private sector. This is different from deregulation. Under deregulation, a dominant bureaucratic state is gradually dismantled and replaced with more effective and efficient administration of the private sector based on market principles . Amin (1999) conceives deregulation as a deliberate policy which must be consciously undertaken rather than a natural state of affairs where the strategies of large enterprises are released from the constraints of state policies.

Oparah (2005) is very optimistic about deregulation, and sees it as a corollary for sustainable political development. Accordingly, it entails opening up of the market and de-monopolization of the hitherto state-owned and managed enterprises, which is part of the requirements of good and transparent governance that liberal democracy represents. He believes deregulation is not only essential for strengthening democracy but also for promoting economic prosperity. Deregulation seeks not only to open up African markets for FDI and to limit corruption (Ayee 2005), but also to abolish policy deficiencies, budget deficits, and low productivity (Larbi 1999).

According to Olaopa et al. (2009), deregulation refers to the removal of certain government controls (such as price controls) from several aspects of a specific industry, like the oil industry. In respect to full deregulation in the oil sector, government is expected to not interfere with the pricing, export, and importation of oil products or the downstream market (e.g. establishment of retail outlets (petrol stations), storage depots ocean-receiving facilities, and refineries ). Kupolokun (2004) gives voice to the inevitability of deregulation of the Nigerian downstream petroleum sector. According to him, it involves not just the removal of government control on the prices of petroleum products, but also the removal of restrictions on the establishment and operations. This includes refining, jetties, and depots allowing the private sector to freely import and export petroleum products in accordance with prevailing market forces. Other protagonists present an alternative vision to this positive and developmental imagery of deregulation, critiquing the whole idea of neo-liberal economic policies as exploitative and counter-productive in developing economies.

A full grasp of deregulation needs to be ideologically located within three major schools of thought: classical liberalism; radical political economy; and consolidation of the regime. The classical liberals—otherwise known as neo-classical economists or what Eme and Onwuka call “economic internationalism ” and what Olayode (2005) refers to as “neo-liberal orthodoxy”—staunchly support the liberalization policy of deregulation. The radical political economy school of thought sharply opposes deregulation, labeling it as a foreign construct and linking it to a form of neo-imperialism. Pevehouse (2008) offers another perspective, which I term the regime consolidationist viewpoint. This school of thought queries the possibility of the societal elites accepting such a policy in newly democratized societies. This is based on the fear that deregulation might generate forces that would eventually truncate the progression of the democratic political system.

The neo-classical economic tradition provides the ideological motivation for deregulation and other globalist economic policies (Friedman 1962; Horwitz 1986; Boron 1995; Tabulawa 2003; Eme and Onwuka 2011; Luqman and Lawal 2011). Their positions are premised upon open and competitive economies in which the forces of the market determine the working of key economic variables. In all societies, there is strong relationship between economic power and political status. The economically dominant individual or group has a greater propensity to dominate politically. In modern democracies, this link is stronger. For instance, Rapley (2004) asserts that the costs of election campaigns have increased the dependence on money. Bretton Woods institutions have relied on the postulations of the neo-classical economists to support advocacy for the idea of minimalist government as part of their structural adjustment programme policy prescriptions in many developing countries since the 1980s.

This perspective—built on the ideas of Milton Friedman, Friedrich Hayek, Adam Smith and David Ricardo—is at the core of prevailing neo -classical liberal policies advocating for economic liberalization (Boron 1995, p. 34). They contend that the best way to create political and economic prosperity is by freeing economic interchange from political restrictions (Eme and Onwuka 2011). This school of thought resonates with the idea of non-government interference in economic activities, and propagates individual sovereignty. Friedman presents the market in opposition to the state, treating the two as intrinsically antagonistic. Boron (1995) emphasizes the state’s coercive and authoritarian posture, while the market is the cradle of freedom and democracy. It follows that where the state is heavily involved in economic activities there cannot be talk of individual autonomy and freedom. The inseparability of liberal democracy and capitalism reinforces the contraction of state business in the act of doing business. Liberalists place great trust in individuals and entrepreneurs as free market drivers in a system best operating under the authority of capitalist-minded political elites. It becomes instructive to note that neoliberalism is an amalgamation of neoclassical economic theory (capitalism) with neoclassical liberal political thought (liberal democracy) (Rapley 2004, p. 75).

In more recent times, inspiration for this viewpoint comes from the adoption and successes of neo-classical liberal policies in the developed societies. Between the end of the 1970s and early 1990s, conservative parties in the United Kingdom and the United States embarked on a sustained ideological and policy agenda to dismantle the capacity, scope and role of the state in a bid to return to the “free market” dogmatism of the eighteenth and nineteenth centuries (Olayode 2005, p. 26). Starting from the 1980s, liberalization policies in the form of public sector reforms were introduced in favour of a market economy. According to Olayode (2005), these market economies were understood in terms of “lean and mean states” or “less government” as part of a neo-liberal alliance of conservative governments. In Africa, the Liberalists demonstrated a distrust of states as perceived stumbling blocks for sustainable development. States were viewed as obstructionists to the free functioning of markets—impeding private enterprise, consuming a disproportionate share of investible resources, extending state reach beyond what was desirable or necessary, over-centralising the development process, and stifling private initiative (Olukoshi 1996). State protectionist policies and interventionism were judged to be antithetical to economic growth and development.

The radical political economy approach vehemently rejected the assumptions of the neo-classical and neo-liberal theoretical rationale for deregulation and justification of other liberal economic policies as a panacea for tremendous economic development in developing countries such as Nigeria. Amin (1996) posits that economic openness destroys local industry and creates new technology that breeds unemployment.3 The local population—who are mostly the targets of economic relief packages—becomes incapacitated and stripped off their means of livelihood through the loss of jobs. It was ascertained that the global push for liberalization as an instrument to accelerate economic growth in Less Developed Countries (LDCs) is a myth. Levine and Singh (Robert 2010) believe the World Bank and IMF sponsored financial, monetary, or economic reforms would not benefit the mass of the people in these societies. More importantly, this occurs due to the variation in the socio-economic structures between developed and underdeveloped countries. Therefore, policy reforms which tend to work in developed societies would most likely fail in LDCs.

Godwin and Dagogo (2011) draw an additional parallel with the argument that there is indeed a strong convergence between capitalism, colonialism and imperialism—which represents a theoretical milieu underpinning deregulation. According to this school of thought, colonialism severally de-capitalized the developing economies, distorted and dislocated their socio-economic and emerging political systems. This aligns with the dependency school of thought that the African economy was disarticulated and specialized consciously in the production of raw materials to feed the advanced capitalist countries in an international market with unequal exchange and gross inequality. Thus, the colonized societies in the periphery depend on the core countries for economic survival in a profit driven and aggressive capitalist international system.

The political independence that characterized the early 1960s and thereafter in many African countries like Nigeria did not end the tide of dependency, domination, or exploitation; instead these countries saw what emerged as neo-colonialism and neo-imperialism.4 Therefore, it becomes apparent that the deregulation and liberalization of the Nigerian economy is an idea packaged, masterminded, and exported by the metropolis thorough the agencies of globalization (e.g. World Bank and IMF ) to further the interests of the hitherto colonial powers and other advanced capitalist countries (Ihonvbere 1999). The local political and economic elites, inspired by economic nationalism, were willing to lend their support to any attempt to adopt a state minimalist ideology and insist that the state should continue to play a crucial and major role in directing the development agenda of the society (Olayode 2005). This is founded on the far-reaching consequences of the success of the Russian revolution, the social degradation caused by the great depression of the 1930s, and the political impact and outcomes of the two World Wars—which led to the first serious pendulum shift towards a more activist and interventionist role for the state. There were also many localized financial crises such as those experienced in Turkey (1990) and Mexico (1994), implosion of the U.S. stock market (1997–1998) and the terrorist attacks of 2001 (Rapley 2004, p. 8).

Olayode (2005) buttresses this point by making reference to the political economy of many countries from the mid-1940s up to the mid-1970s when states assumed greater functions and responsibilities. Governments during this time took a stronger hand—especially in sensitive sectors—with the use of state-owned enterprises in the provision of public services, policy coordination and macro-economic management, and involvement in sectors of the economy. The economic depression experienced in the early twenty-first century (2008–2010), the triumph of the Socialist Party in France, the frantic resuscitation efforts of the President Obama-led regime in the U.S. banking sector and other state-protectionist policies initiated by advanced capitalist countries tend to reinforce this trend.

The regime consolidationists are very skeptical about the survival tendency of the democratization process when subjected to strain, which they attribute to the un-democratic activities of some political elites who reap the benefits of authoritarianism. According to Pevehouse (2008, p. 3), the question consolidationists usually raise is how emerging democracies would overcome threats to nascent institutions posed by anti-democratic forces that had previously benefited under undemocratic, authoritarian regimes. The survival rate of contemporary democracies in their infancy has been judged as low. Power and Gasiorowski (1997) found that one-third of all young democracies fail within five years. The uncertainties involved in implementing oil sector reforms is a possible reason why President Obasanjo’s regime waited to introduce the deregulation policy until after the completion of his first four-year term. The elites (not necessarily political) needed to be re-assured of the workability and credibility of the economic reforms before supporting the action. Pevehouse (2008) further posits that if the elites are not convinced about the sincerity of reforms, they are unlikely to lend support to the government. This lack of support could easily lead to a mobilization of the masses resisting deregulation to the point of jeopardizing democratic consolidation. The strong resistance against the deregulation of the downstream oil sector by the Nigerian masses, civil society, and a cross-section of Nigerian elites should also be understood within this context.

Despite its oil wealth, Nigeria continues to grapple with economic development and struggles to combat poverty. Gboyega et al. (2011, p. 17) associate the endemic impoverishment with corruption, lack of transparency, and institutional incapacity. Obi (2011, p. 103) provides the motivation for deregulation of the oil sector to reclaim Nigeria as oil rich country from its current status as a “successful failed state”. According to Obi, deregulation prevents parastatal losses and increases an environment of efficiency. A free market economy devoid of state intervention will instigate economic prosperity that will “trickle down” to the poorest members of society (Ayee 2008, p. 83). This had been the position of the international creditors that initiated liberalization across Africa in the 1980s and 1990s. The IFIs responded to Sub-Saharan poverty, mismanagement, and economic malaise by instigating a refocus on economic growth through a structural reversal of state-imposed obstacles to the efficient operations of markets (Stein and Nafziger 1991; Ayee 2005; World Bank 1997). This was one of the government’s rationales for the deregulation of the Nigerian downstream oil sector5 in 2003.

The Nigerian oil industry6 was not subjected to market forces until 1973 when uniform oil pricing was introduced throughout the country. This is one of the defaults of Nigeria’s federalism, and what a respondent termed “onward federalism”.7 This injected complicity into oil governance for many reasons, including: oil price fluctuations in the international market; crisis in the Niger Delta region; recurring increases in the price of fuel ; corruption and mismanagement; institutional weaknesses; bureaucratic incompetence; and the dishonesty of both local and international oil sector actors (Kupolokun 2004).

The government has raised alarm over the huge cost of subsidies. Attempts to remove subsidies have generated much opposition from consumers used to cheap energy prices based on the presumption that any price increase would fuel inflation and reduce economic welfare. In 2006, the subsidy for oil was N261.1 billion (US$2.03 billion) (or 1.4% of GDP). The price rose to N278.9 billion (US$2.3 billion) in 2007 (or 1.3% of GDP) and tripled to N633.2 billion in 2008 (US$5.37 billion) due mainly to a rising oil price and depreciating exchange rate. Thus, between 2006 and 2008, government subsidy payments to Nigerian National Petroleum Corporation (NNPC) and other petroleum product marketers was N1,173.2 billion (US$9.7 billion) (Adenikinju 2009, p. 4).

Olayode (2005, p. 28) attributes institutional failures on good governance to over-staffing and an over-bureaucratized public sector, while Gboyega et al. (2011, p. 7) argues that is was the inability to establish responsive institutions that could ensure governance in the public interest. Gillies (2009) emphasizes the lack of transparency in the award process for development blocks and insists that subsidies for petroleum product create further avenues for corruption via imports/export arbitrage, black-market sales, and delays on payment reimbursements, among others. She posits that sector restructuring is germane and involves introducing a new legal framework for new institutions and clear roles within a cost effective NNPC , as well strong and independent regulatory institutions with less political interference. The newly-passed Petroleum Industry Governance Bill (PIGB) includes provisions directed at these propositions. In sharp contrast, a review of Robert’s study (2010, p. 3) raises some pertinent observations and argues against Nigeria’s joining the privatization “train”. Robert (2010) made reference to Wade’s work in 2009 which advocated that the West should jettison the attempt to frame universal operational rules and rather promote the principle of “subsidiarity”. This view welcomes a diversity of regulatory frameworks that respond to differences in country preferences and in levels of development. Here, the spread of a single variety of capitalism through the WTO, IMF and the World Bank is harmful to developing states.

The study also reinforces the argument that deregulation increases fragility and inequality. A key point here is that economic behaviour does not necessarily replicate identically in all countries. Economic structures, institutions and history play sensitive roles. Furthermore, Robert (2010, p. 4) makes reference to Minsky’s model, insisting that deregulated market economies are not dynamically stable systems that converge to full-employment equilibrium. Rather, these systems are cyclical in nature in which crises are not unusual events. He attributes the collapse of the East Asian economy in the mid-1990s to implementation of pro-United States policies advocated for by the IMF . A nationwide survey in 2000 by the Afrobarometer group, reported that 60% of respondents were of the opinion that the regime economic reform programme and policies have “hurt most people and only benefited a few”, while 84% were of the opinion that “people close to the government” have benefited the most from these reform programmes (Luqman and Lawal 2011, p. 72; Lewis et al. 2002, p. 33). There are strong insinuations within the public sphere that the deregulation of the oil sector is purported to deregulate the oil wealth—in the form of corruption—and allocate the oil resource to new political elites.

The report also reveals unanimous perceptions in the general population that public policies have failed to reduce social inequalities and have even aggravated socio-economic imbalances. A follow up study in 2001 revealed that a cross section of Nigerians was ambivalent about the course of economic reform as many are dissatisfied with the record of liberalization policies. The report also found that about three-quarters of respondents believed that the reform programme had been detrimental to the majority of Nigerians and that the burdens of economic reform had been unfairly and unjustly distributed (Lewis et al. 2002).

Another opinion survey by the same group (Afrobarometer) in 2005 reported a persistent disappointment and frustration with Nigeria’s emerging democracy and economic reform policies. Using a measure of performance and legitimacy based on survey reports from 2000, 2001, 2003 and 2005, the Afrobarometer group stated that Nigerians are increasingly downbeat about government efforts to manage the economy, encourage equity, provide quality education, and limit crime.8

Research conducted by the Strategic Union of Professionals for the Advancement of Nigeria (SUPA)9 revealed that fuel importation driven deregulation would only boost the investments of operators at the detriment of petroleum product users (Ejiofor 2010). A total reliance on the importation of petroleum products, when the cost of refining locally (put at N31.50k) was far less than those imported would result in more impoverishment of the masses. The policy would undermine the utility of national assets and investments in refineries as it would lead to the abandonment of large-scale national investments in four existing refineries . The study also found that the resulting increase in unemployment from job loss in domestic refining and industrialization would not be compensated by operators. Operators instead would abandon domestic refining for imports, thereby subjecting the masses to the dictates of international market dynamics like other non-oil producing countries. This development, according to SUPA, would undermine Vision 20:2020 and trigger hyper-inflation in the economy. The Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) confirmed that the Nigerian economy has consistently experienced hyper-inflation.

The SUPA study concludes that deregulation leads to increases in the price of petroleum products, energy, and transportation—as well as spill-over effects felt in other sectors. Worsened economic conditions then aggravate political and socio-economic problems due to increased poverty, incessant labour and industrial crises, increased crime, and hopelessness. In the words of the SUPA study:

Projects Costs will have to be reviewed and revised and this will hinder progress of infrastructural development projects associated with government’s 7 Point Agenda. Since local refining experts will have lesser opportunities in the face of reliance on importation, full deregulation under this present circumstance, will undermine Nigeria’s technological development. (Ejiofor 2010)

Reviewing the rationale and conditions necessary for genuine deregulation policy is consequential. Ibanga (2005) believes that an effective deregulation program must include institutional constraints against collusion by the different investors and owners of the hitherto government enterprises. The state must still be able to influence price mechanisms without actually fixing any price ceiling, an action which might otherwise jeopardize privatization or deregulation efforts. Olaopa et al. (2009) note how important it is to create a supportive and enabling environment, including favourable macroeconomic conditions, a well-functioning legal system and adequate financial markets and institutions to incentivize private sector and enterprise development.

Furthermore, there must be political will in support of the programme to address the inevitable severe resistance from bureaucrats, civil societies, effected elites, and the general population. It is still the opinion of some analysts like Olaopa et al. (2009) that in most cases such as Nigeria deregulation of the petroleum sector should be implemented in phases to allow the state-owned enterprises to regain efficiency before considering full privatization. Deregulation, if implemented hurriedly might not achieve the desired intention, especially as public enterprises have at the same time been so inefficient and unattractive to wiling private investors. Some conditions must be met for deregulation to spur economic growth. Accordingly, sound economic policy requires good public institutions, good laws, and effective financial institutions—all of which require a vibrant judicial system10 and capital markets for effectiveness. It also requires a good Securities and Exchange Commission (SEC) evidenced in countries such as the United States experience to ensure the protection of minority shareholder rights. Further, in what might seem trivialities, requirements for institutional infrastructure that make market economies work and the readiness governments to play a sensitive role as a complement to the market economy.

An associated reality of the deregulation in the downstream oil sector has been the complete removal of subsidies on local consumption of petroleum products. The reform of price subsidies remains an important element of IMF -supported programs across the globe. These initiatives have brought prices of subsidized items near par or closer to their market-clearing levels (Gupta et al. 2000). The study notes that subsidy reform was typically undertaken in the context of macroeconomic adjustment with the intent to achieve fiscal savings consistent with stabilized prices and exchange rates.

According to the study, the reform of price subsidies would be expected to improve efficiency in allocation and promote economic growth all while with an awareness of resulting short-run socio-political adverse effects. The negative effects of reforms could be alleviated and eliminated by implementing the policy in phases or establishing what Gupta et al. (2000) refer to as social “safety nets”. The study tries to provide conditions before subsidy withdrawal and plots a road-map for successful reform. However, the study does not quite address the divergence between subsidy withdrawal in oil-rich and non-oil rich societies.

Furthermore, Baig et al. (2007) focuses on the review of international experiences of deregulation on domestic petroleum products and the cancellation of price subsidies. He found that the following conditions have to be met: liberalizing domestic petroleum product prices (or instituting a robust automatic adjustment formula); combining price increases with a well-publicized package of targeted measures to mitigate impacts on the poor (with at least some measures having immediate effect); making transparent and publicizing the costs and benefits of the present system of subsidies; identifying priority public expenditures that are better targeted at poor and middle class constituencies (which could be financed with budgetary savings from reducing fuel subsidies); and getting the timing and size of price increases right.

3.3 Critique of Deregulation Policy

Amin (1999) agrees that deregulation is a cautious policy—consciously initiated rather than a natural state of affairs—whereby private enterprises are given the opportunity to conduct business in their own way in accordance with the rules of engagement of a state. It was soon discovered that the independent strategies of private industries do not constitute a coherent and collaborative effort required for economic stability of a new reform order. According to Amin, deregulation activities by their very nature create distortions and expose the critical vulnerabilities of globalization as a process. Egbu (2009) queries any rationale for deregulation in the oil sector and is critical of successive administrations—at least for the past twenty years—and makes a point of the duty to prioritize correcting prior wrongs in the petroleum sector. According to Egbu, oil continues to determine whatever reform is implemented by government. He wonders why little attention is directed towards resuscitating dying industries, fixing erratic electricity supply, constructing world-class hospitals with proper healthcare policies, creating a modern transport system, and investing in good roads.

Olaopa (2011, p. 2) notes that reform is required “to restore an organization when it has degraded from what it was originally designed to be”. Therefore, reform should transform the government and reshape the responsibilities of the state in relation to its citizenry. Undertaking such a policy shift, the government must make conscious efforts at reducing the cost of running the state while prioritizing institutional and labour capacity. This did not happen in Nigeria in his view. Instead of empowering the most active part of the population, which constitutes the labour force, the reform circumvented this group in favour of the elite and foreign counterparts. He is highly skeptical about the liberalization of the petroleum sector in Nigeria due to the high tendency to consolidate the interests of foreign and local capitalists against the interests of the national population. Complete removal of oil subsidies will result in a tilt of the general population towards unimaginable impoverishment, eventually triggering rebellion and mass protest. Egbu (2009) further explains that deregulation:

Will mean opening the space for everybody who thinks he has the capacity to import fuel into this country to do so. Mind you, the operational procedure is to import, so there will be capital flight, because the fuel would have to be bought with our currency but at the international price. So what happens is that we lose our money, they make the profits, and keep their companies going including providing high paying employment for their citizens. (Egbu 2009)

The acceptance of deregulation couched in liberalization of the economy has deepened poverty in the developing states which creates economic tragedy in these societies (Dagogo and Godwin 2011). The activities of the Bretton Woods institutions, in particular, have worsened the economic status of states like Nigeria and further contributed to the underdevelopment of the developing states in general. These policy decisions reposition Nigeria and other similar states as subservient economies entirely dependent on foreign powers for survival. Efforts at economic reform in the guise of privatization and deregulation are particularly riddled with complexity and negativity. Nura (2003) claims against the presence of a clear divergence between the business class and the ruling class in Nigeria. The capitalist class who invest in the economy as a result of liberalization policy is the same as the people occupying the most lucrative political positions and high ranking public officials. This creates a multi-dimensional problem by transforming public monopoly into private monopoly. Within this school of thought, realization grew that MNCs conspire with the political elites to dominate and monopolize investment in key areas of the economy such as the banking, oil, communication, and energy sectors that were hitherto liberalized. Here, the domineering posture of the MNCs is an impediment to popular participation and a distortion of an LDCs political economy.

3.4 Conclusion

Deregulation policy is one of the mechanism devised by global capitalist powers—through the IFIs—for opening-up the economies of developing world to global capital. It is part of the liberalization packages exported to countries struggling to respond to the economic aspirations of the citizens and the fiscal imbalances of states. The major intent of advocating liberalization was to dismantle the regulatory power of the state over the market and allow the unfettering forces of the market to determine the supply, demand, and price of products. Deregulation is one of the end results of the integration of Nigeria into the global economic order. Deregulation offers diverse appeals for accelerated development of the economy. However, the chapter exposes the difficulties encountered in the attempt to implement deregulation policy in an oil-rich country like Nigeria. This highlights the criticism associated with deregulation policy.

Footnotes

  1. 1.

    Economic policy is conceived as the action-statement of the government pertaining to specific sectors of the economy, describing the intended objectives and how to achieve them. In most cases, the object of economic policy is to improve the welfare of the people, either in the short term or the long run. Theoretically, the formulation of an economic policy involves the collection, arrangement, analysis, summary, and interpretation of economic data, while policy evaluation remains a critical part of the policy process. For more understanding, see Adedipe (2004).

  2. 2.

    See Baig et al. (2007) for robust analysis of privatization policy.

  3. 3.

    Many Nigerians lost their jobs after the privatization of the telecommunication sector as a result of the change in from government to private ownership; former government employees were relieved of their jobs.

  4. 4.

    The two terms—neo-colonialism and neo-imperialism represent a new form of colonialism and imperialism. Imperialism led to colonialism, and the end of colonialism was occasioned by political independence of the colonies without outright economic autonomy. The sustained domination of the economy of the periphery by the former colonial powers and their Western counterparts through exportation of capital and MNCs control connotes neo-imperialism. This is similar to neo-colonialism which was designed to use the weapons of economy in influencing the political and economic decisions of former colonies. It is an act of reclaiming “lost kingdom and protectorates” without affirming direct political authority on the hitherto colonized countries.

  5. 5.

    Nigeria’s downstream oil industry comprises four refineries and, as of 2012, had nameplate capacity of 445,000 billion barrels per day (bbl/d), eight oil companies and about 750 independents all active in marketing petroleum products.

  6. 6.

    Crude oil is the mainstay of the Nigerian economy; it shapes the economy and political destiny of the country. This comprises crude oil and gas, including the upstream and downstream sectors. The upstream sector deals with oil exploration, operated by MNCs , while the downstream sector deals with the distribution and management of diesel, kerosene and PMS (petrol). The government has awarded oil blocs to marketers to import and distribute oil under the management of state institutions. The Niger Delta basin is the largest along the West African coast; it has 246 production fields and 3446 active wells. It has recoverable carbon of over 20 billion barrels of oil and 120 TCF of gas. The confirmed deposit of the offshore is 6 billion barrels of oil. The estimated potential of the basin is 70 billion barrels. The crude oil reserve base was mere 25 million barrels in 1959; in 2012, it stood at 32.5 billion barrels of oil and 187 trillion cubic feet of gas.

  7. 7.

    The principle of uniformity in the country is alien to effective governance. For instance, the same price is attached to petroleum products across the country. This has generated complicity in oil governance due to variation in the landing cost of petroleum products in locations that are very far from oil-depot.

  8. 8.

    See Luqman and Lawal (2011) and Lewis et al. (2002) for the full report.

  9. 9.

    SUPA is an organization of Nigerian professionals whose membership is drawn from all disciplines and is committed to professional excellence, ethical integrity, social cooperation, justice, selfless service and national progress. It is a network geared towards attaining professional cooperation, social integration, self-development and national services through collaborative efforts and individual contributions; see http://www.supanigeria.org/

  10. 10.

    It takes more than the overturn of the ruling party’s (PDP ) victory in election—in some states—for the judiciary to be vibrant.

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Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Adeoye O. Akinola
    • 1
  1. 1.Department of Public AdministrationUniversity of ZululandKwaDlangezwaSouth Africa

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