ABSTRACT

In the past decade or so, Nigerians have been traumatized by the impact of fuel crises. Lives have been lost and some productive enterprises have either gone under or operating far below optimal level as a consequence of fuel supply shortage and unpredicted high pricing associated to the mismanagement of the downstream sector of the petroleum industry. The federal government is aware of this problem and decided to appoint a committee of technocrats to chart a new mode of operating the downstream sector. The committee recommended a paradigm shift from regulation to deregulation of the downstream sector. The sector was deregulated. Until then however, very little was known about deregulation in the Nigerian economy particularly in the running of public utilities in which the petroleum industry is a foremost concern. The study examined amongst others, the strategic management system of firms in the downstream sector, the nature of benefits that come from the deregulation of the sector, the process of strategic charge in a new business environment by firms in the downstream sector of the petroleum industry with a view to determining the impact of deregulation on the strategic management of these firms and to ascertain the risks associated with strategic change in terms of impact on the growth of the firms. Also examined are the best practices in the global petroleum industry, an analysis of the strategies for deregulating the Nigerian downstream sector in relation to best practice, and leadership styles of managers/entrepreneurs of the petroleum marketing firms. The survey method was used in line with the objective of the study data were obtain from both primary and secondary sources and chi-square statistic was applied to test the hypothesis. The study reveals that deregulation is desirable and that the petroleum marketing firms dwindling collective performance hangs on the fact that their management system lacked the capacity to adjust strategically to the deregulation of the sector. Based on the fining of the study a number of recommendation believed would eliminate the hurdle on the way to successful operation of the sector were made. Conclusively, the study maintain that the deregulation downstream sector requires a change in business modes of operation and that the gain accruing to the policy are worth the effort.

TABLE OF CONTENTS

Title page       –           –           –           –           –           –           –           –           –           i

Certification –           –           –           –           –           –           –           –           –           ii

Dedication     –           –           –           –           –           –           –           –           –           iii

Acknowledgements                  –           –           –           –           –           –           iv

Abstract         –           –           –           –           –           –           –           –           –           iv

Table of contents     –           –           –           –           –           –           –           –           vi

CHAPTER ONE: INTRODUCTION      –           –           –           –           –           1

1.1       Background of the Study    –           –           –           –           –           –           1

1.2       Statement of Problem          –           –           –           –           –           –           6

1.3       Objectives of the Study       –           –           –           –           –           –           8

1.4       Research Questions             –           –           –           –           –           9

1.5       Hypothesis Formulation     –           –           –           –           –           –           9

1.6       Significance of the Study    –           –           –           –           –           –           11

1.7       Scope of the Study   –           –           –           –           –           –           –           12

1.8       Limitation of the Study       –           –           –           –           –           –           13

1.9       Definition of Terms                –           –           –           –           –           13

1.10    References    –           –           –           –           –           –           –           –           17

CHAPTER TWO: REVIEW OF THE RELATED LITERATURE   18

2.1       Introduction –           –           –           –           –           –           –           –           18

2.2       Strategic Change      –           –           –           –           –           –           –           18

2.3       Benefits of Deregulation     –           –           –           –           –           –           21

2.4       Strategic Adaptation to Change of Business Environment     25

2.5       Post Regulation Risk of Firms in the Downstream         –                27

2.6       Leadership Styles of Managers and Entrepreneurs     –           29

2.7       Best Practice in the Global Oil Industry   –           –           –           –           34

2.7.1   French Background      –           –           –           –           –           –           34

2.7.2   Germany Background         –           –           –           –           –           –           36

2.7.3   Italy Background      –           –           –           –           –           –           –           38

2.7.4   Kuwait Background             –           –           –           –           –           –           39

2.7.5   Japan Background   –           –           –           –           –           –           –           41

2.7.6   Australia Background         –           –           –           –           –           –           42

2.7.7   Venezuela Background       –           –           –           –           –           –           43

2.7.8   United States Background –           –           –           –           –           –           44

2.7.9   Analysis of Strategic Prepositions for deregulating the

downstream sector   –           –           –           –           –           –           –           45

2.7.10   Four strategic propositions for deregulating     –           –           –           47

2.7.11   Strategic 1: Partial deregulation of only the supply side         –           47

2.7.12   Strategy 2: Partial deregulation of only the demand side        –          50

2.7.13   Strategy 3: Complete deregulation of the downstream sector      –           52

2.7.14   Strategy 4: Fine-tuning the status quo    –           –           –           –           54

2.8       Summary of the Review      –               –           –           –           –           55

2.9       References    –           –           –           –           –           –           –           –           58

CHAPTER THREE: RESEARCH METHODOLOGY           –           –           64

3.1       Introduction –           –           –           –           –           –           –           –           64

3.2       Research Design       –           –           –           –           –           –           –           65

3.3       Sources of Data        –           –           –           –           –           –           –           66

3.4       Instrument for Data Collection      –           –           –           –           –           66

3.5       Method of Data Collection            –           –           –           –           –           67

3.6       Populations / Sample Size Determination          –           –           67

3.7       Validity and Reliability of Instrument for Data Collection       –           68

3.8       Procedure for Data Analysis          –           –           –           –           –           68

CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA            71

4.1       Presentation and Analysis of Data       –           –           –           –           71

4.2       Test of Hypothesis  –           –           –           –           –           –           –           79

CHAPTER FIVE: FINDINGS      –           –           –           –           –           –           96

CHAPTER SIX: SUMMARY OF FINDINGS, RECOMMENDATIONS

        AND CONCLUSION –           –           –           –           103

6.1       Summary of Findings            –           –           –           –           –           103

6.2       Conclusion    –            –           –           –           –           –           –           105

6.3       Recommendations         –           –           –           –           –           107

6.4       Area for Further Study    –           –           –           –           –           109

REFERENCES        –           –           –           –           –           –           –           –           110

APPENDIX II: QUESTIONNAIRE        –           –           –           –           –           118        

CHAPTER ONE

INTRODUCTION

1.1       Background of the Study Area

All over the world, reasons for reforms in the public sector vary from country to country depending on the objective, peculiarity and the circumstance that the country finds itself. The issue of reform of the Nigerian downstream sector refining and distribution of petroleum products has been on for quite some time. It has however, become more compelling in the last few years given the trauma of scarify of petroleum products that the nation has continuously witnessed.

Prior to 1965, petroleum products domestic requirements were met entirely through importation under a deregulated environment. By 1965, it had become apparent that the nation, haven gained independence five years earlier, could no longer rely on important for its entire requirement.

Consequently, the first refinery in Nigeria – the old Port Harcourt refinery was built in 1965 as a commercial venture to provide petroleum product at market related prices. It was a 35,000 bard per day refinery jointly owned by shell (25%), British Petroleum (BP) 25%, the Federal Government (20%), and the three regional governments (10% each), (Kopolokun, 2004).

However, by mid 1970s, with the advent of the oil boom government became directly involved in the downstream sector by building two new refineries and lacking over the first. The Warri refinery was commissioned in 1978 while the Kaduna refinery came on stream in 1980. Government’s main objective was to make petroleum products available throughout the country (www.nnpcNigeria.com)

With the change in ownership structure, the pricing, policy was modified and controlled to encouraged national distribution at uniform prices. This incidentally introduced the issue of bridging and price equalization at government’s expense. This was later inherited by the Nigerian National Petroleum Corporation (NNPC).

However, these controlled prices did not respond to the continuously changing business and economic environment. Thus, the control of petroleum products prices by government mark at difficult to earn enough resources to maintain the refining and distribution assets.

Since the commencement of government’s direct involvement therefore, prices of major petroleum products such as premium motor spirit (PMS), Automotive Gas oil (AGO) and dual purpose kerosene were set by government. This, of course, has been disincentive to the private sector investment in refining (Kopolodun, 2004).

Also, the impression is created that since Nigeria is an oil producing nation, petroleum product must be cheap regardless of the cost of productive.  This has resulted in economic dislocation with its dire consequences. Such consequences include.