Theoretical and conceptual issues in economic reforms: application to Nigeria's downstream petroleum sector.

Abstract

This paper examines the theoretical and conceptual issues pertaining 10 economic reforms. The author adopted a survey method approach to discussed the classification of economic reforms into first-generation and second-generation reforms, and examines their categories, namely, institutional, labour, financial market and product market reforms. On the speed and sequencing of economic reforms, the paper investigates two alternative paths of economic reforms for an economy that has a large public sector like Nigeria. The two paths are gradual approach and "big-bang" approach. Related to the discussion about the speed of adjustment, the paper examines the economics of petroleum product pricing in Nigeria. It discusses the estimation of petroleum product subsidies in the country, and notes that domestic petroleum market regulation led to two distortions. An attempt to remove the distortions leads to an illustrative analysis of market prices of petroleum products based on the criteria of efficiency, equity, revenue raising and correction of externalities. The paper concludes that petrol and diesel should be sold at market prices while kerosene should be subsidized because of deforestation problem.