The mathematical economics of the zerorisation principle of white petroleum products transportation in Nigeria

Abstract

The journey to a uniform pump head pricing of Premium Motor spirit (PMS), Dual Purpose Kerosene (DPK) and Automotive Gas Oil (AGO), commonly called petrol, kerosene and diesel, respectively, started in 1973 with the uniform pricing mechanism. This was followed in 1975 by the equalisation principle, on which basis the Petroleum Equatisation Fund (Management) Board was created. In 1981, the Nigeria National Petroleum Corporation took over the distribution of PMS, DPK and AGO and reimbursed oil marketers directly in a process tagged “Zerorisation”. Zerorisation itself was subjected to more refinement and sophistication in 1987 with the introduction of the concepts of Transport Differentials Zone (TDZ) system, The National Transportation Average (NTA), and the Zonal Transportation Differential Rates (ZDR). The calculations necessitated by the application of these concepts and the economic phenomena associated with them have given rise to a new mathematical economics of its own. The formula which constitute the organising principle of this mathematical economics is subjected to both economic and mathematical appraisal in the article. After disaggregation and analysis the formula is found to be merely an agglomeration of variables into an excessively linearised relationship. This papers proffered is a non-linear, multiplicative relationship, which can be estimated by ordinary least squares regression method.

Nigerian Journal of Technology and Education in Nigeria Vol. 8(1) 2003: 42-51