DEREGULATION OF THE PETROLEUM DOWNSTREAM SECTOR AND NIGERIAN ECONOMY: AN ECONOMETRIC INVESTIGATION

Nigeria is abundantly endowed with petroleum resources and over the years has generated huge revenue from it. However, the domestic pricing of petroleum products has been a subject of controversy. While some believe that government should continue to regulate and subsidize the products, others opine that total deregulation of the petroleum downstream sector should be enforced to stimulate competition in the sector. Considering that the Government has in one time or the other partially deregulated the price of petroleum products, and recently, totally deregulated the market, this study examines the impact of deregulation of petroleum product prices on the economic growth of Nigeria from 1980 to 2015. The sources of data for the study include the World Bank Economic Indicators, the Nigerian National Petroleum Corporation and the OPEC Statistical Bulletin. The study employed the Augmented Dickey-Fuller unit root test to test for the stationarity of data, while the long-run equilibrium relationship of the variables was tested with the Johansen Cointegration test. Moreover, to determine the relationship between the deregulated petroleum product prices and economic growth of Nigeria, the Least Square technique was used, whereas the Granger Causality test was employed to determine the direction of causality between variables. The findings revealed that the deregulation of the petroleum downstream sector is strongly related to economic growth of Nigeria, nevertheless none of the prices of the petroleum products have significant impact on the economy of Nigeria. This study therefore recommends that existing refineries should be made to function optimally and new ones built to help stabilize the domestic price of petroleum product. To achieve this, there is need for private participation and investment considering the fact that government cannot do it alone.