Trade in Nigeria’s Petroleum Products Market: Theoretical Base for Oil Subsidy Removal Policy

Abstract

This article focused on detailed analysis of trade transaction within Nigeria's petroleum products market. It was aimed at developing theses which could be constituted into vibrant theoretical framework to support oil subsidy removal of the federal government. Study was designed as a descriptive survey. Data were sourced from National Bureau of Statistics, Nigeria National Petroleum Corporation and Central Bank of Nigeria. Data were analyzed using partial correlation and time series component of trend. Results indicate that 1. there was a significant inverse relationship between demand and price of petroleum products 2. Trade on AGO tended towards market pricing system 3. DPK was more readily available at low price during partial privatization regime 4. Trade on DPK tends towards tends towards market pricing system 5. PMS was more readily available at low price during partial privatization regime than it was available at higher price during partial subsidy regime 6. Rise in price of PMS accompanied by corresponding rise in its demand revealed PMS as pseudo-giffen good. Based on these findings, it was recommended, inter alia, that FG should embark on total oil subsidy removal in other to subject petroleum products to market pricing system for adequate supply of AGO, DPK and PMS at competitive pricing.