LAGOS The Nigerian government has set up a 23-member panel to regulate activities of the downstream oil sector, including the sensitive issue of pricing oil products, officials said on Friday.

The Products Pricing and Regulatory Committee will be headed by former planning minister Rasheed Gbadamosi, who chaired an AD-HOC panel on products prices last year, the officials said.

That panel was set up by President Olusegun Obasanjo after his bid to hike fuel prices by up to 50 percent triggered a violent general strike last June.

Although obasanjo was forced to virtually abandon the price increases, his government now says it is determined to deregulate the downstream oil sector to attract private investment and end long running products shortages in the oil-producing nation.

The terms of reference of the committee published by national newspapers give the body wide-ranging powers, including establishing "parameters and codes of conduct for all operators in the downstream sector of the petroleum industry."

It will also maintain "constant surveillance over all key indices relevant to pricing policy and periodically approve benchmark prices for all products."

That role appears to contradict Obasanjo's declared intention to let the market dictate prices. Investors now are discouraged by the government's role in determining prices.

Nigeria's gasoline prices are currently among the lowest in the world. Obasanjo's government says this encourages smuggling to neighboring states, aggravating shortages largely attributed to inefficiency of domestic refineries.

The government says deregulation will end its fuel subsidies which cost it over $1 billion last year and free money for social sectors such as health and education.

But labor leaders are opposed to any price increases before the recovery of Nigeria's stagnant economy. Although labor participated in Gbadamosi's AD-HOC Committee on product prices, it disagreed with the panel's endorsement of deregulation.

The umbrella Nigerian labor Congress has vowed to call workers out on strike again if government ignores its warning.

With ordinary Nigerians getting increasingly impatient with the government's inability to tackle the country's worst fuel crisis, officials have sought to reassure the public that no price increases are planned.

(Reuter)