Liberals would argue that Populist policy such as subsidy grants are hardly sustainable and that when desirable they should be targeted at production and not consumption.
Proponents of this view have used this argument in support of the deregulation of petroleum products neglecting the characteristic nature of the product .
Petroleum product belong to the category of ‘ impure public goods’. These categories of goods can be freely traded in the market but require periodic regulatory interventions due to market failure.
Market failure occurs when the forces of demand and supply do not determine prices of product.In the case of petroleum products, a high increase in price do not affect demand for the product vice versa. This is because the product lacks close substitute. And giving the nature of the product in transport chain and its multiplier effects on other aspects of the economy, the likelihood of its disastrous consequences on the masses should not be overlooked. This is more so in a country where education, health care services and social infrastructures are beyond the reach of the common. The ‘ social safety nets’ in place lacks the capacity to mitigate the effects on the economy.
Though desirable in the long run,the government should take a second look at its deregulation policy on petroleum products and should focused more on encouraging more players in the local refining of the products, providing alternative sources in order to provide a level playing field in the market until such a time that competitiveness will prevail in the market.
Dr. Aminu Isa is a lecturer with Federal University Lokoja,he writes from Lokoja Kogi state
