Wednesday, May 13, 2009

The failure of deregulation so far..

Where is the analysis when you need it? Matthew Green's article in today's FT lays out both sides at high level, without taking a stance in favour of either side. From the government's perspective, a cartel of some of the most powerful businessmen in Nigeria is resisting the development of local refining capacity, and Nigeria petrol being available from refined Nigerian oil. From the private sector's perspective, the government has botched deregulation by not allowing for price increases to take the place of subsidies (citing union pressure).

The truth is likely to be somewhere in between. The major marketers have no incentive for building local refining capacity as it stands - they risk getting cut out of the deal and make far more money from the export/re-import game anyway. On the other hand, the government has yet to articulate a clear, staged deregulation plan. Only until the marketers are forced/incentivised into developing their own refining capacity will things change.

In the meantime, the nation's budget may not be matched by available funds from low oil prices and restricted output, hence the talks with the World Bank. Isn't this just the story of Nigeria's boom and debt-buying busts since the 1970s repeating itself?


Anonymous,  9:28 am  

@ chayoma

seriously, are you 10 years old? or just new to the internet?

Baba,  2:20 am  


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