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APPRAISAL ON THE IMPACT OF OIL INDUSTRY ON THE ECONOMIC DEVELOPMENT OF NIGERIA

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AN APPRAISAL ON THE IMPACT OF OIL INDUSTRY ON THE ECONOMIC DEVELOPMENT OF NIGERIA

 

CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND OF THE STUDY

In recent times, the quest for better standard of living has resulted to a swift in the Nigerian economy. The contribution of oil industry to the development of the country’s economy therefore is a broad and extensive functional activity which embraces a wealth of task such as oil exploitation, share of industry, petroleum production account and external debt.  These are functions centers on the resulted decision making and process enrooted to close substitute as far as survival of economic situation.

Oil is said to be a mixture of organic chemical derived mainly from the remains of microscopic plants and animal that lives in sees millions years ago. Special condition and great length of times were needed for these remains to undergo complex chemical changes to for oil. These are sometimes concentrated in accumulations which man can detect and exploit.

Oil exploitation began more than a hundred years ago, when drilling was carried out near oil seeps which indicated that oil lay below the surface. Today, much more sophisticated techniques are employed such as seismic surveying and satellite imaging, powerful computers assist geologist in interpreting their finding. At the end of the day however, only the drill can determine whether or not oil lies blow the ground.

Nigeria which has among the world leading producers of palm oil for over two centuries has suddenly become one of the nations of the world with an average production of 2.3millions of barrels per day.

Nigeria’s oil industry has an interesting element in common with the country’s once celebrating palm oil industry. The palm oil trade was a crucial factors influencing the British to maintain and later Amex the territory (The oil Rivers protectorates) in the later party of the 19th century, at the peak of the European scramble for Africa. This is the same location that today habours most of the Nigeria oil exploitation. The oil industry in Nigeria is one of the leading sectors of the economy. It has risen to position of prominence and has become the pivot of the Nigerian economy since its inception in 1952s. However, after two decade of the oil boom, the industrialization of the economy has remained a mirage.

Nigeria hitherto was on agriculture producing economy in the past the export of the economy consisted mainly of agricultural products such as cocoa, rubber and groundnut etc. the picture has changed dramatically and lilted towards the oil industry while other sectors of the economy including agriculture have contained o lag behind. Little wonder then that the country have contained import food substantially which is ironical in view of the fact that agricultural is still the mainstay of the economy employing about seventy (70) percent of the population.

By the earlier 1990s, petroleum production accounted for over ninety (90) percent of foreign exchange receipts (oil export accounted for ninety seven (97) percent of local export receipts) ten (10) percent of GDP. However, more importantly, the rising oil revenue and declining GDP of the late 1980s suggest that the impact of the oil boom in the earlier decades was so detrimental to non-oil economic activities that even increasing oil revenue after the low rate of 1986 were not sufficient to initiate or sustain a GDP recovering. Some structural aspect of the economy reveal the failure of Nigerian oil revenues to provide the impetus for growth in other sector and describe the basis for what has been essentially uneasy manage between energy and economic growth in the country per capital income has declined for about $1,000 (in current dollars) in 1980 to about $240 in 1991. The evolution in the structure of production shows that the share of agriculture in GDP has decline to 37 percent in 1997 and 41 percent in 1986, despite the introduction of the structural adjustment programme (SAP) which emphasized the need to re-establish agriculture as a growth sector.

The share of industry (Manufacturing plus mining) however increased from 29 percent in 1986 to 28 percent in 1991 but more importantly, there has been almost no change in the share of manufacturing (around 7-8percent) over the past ten years, oil revenues it is clear that it has not succeed in the strengthening either the manufacturing or the agricultural base on the economy. Furthermore, the oil boom year and massive government expenditure or what was primarily infrastructure and other non-tradable did not prepare the economy for the oil production cutback of the early 1980s and the price shock to 1986.

The external debt has consequently increased from a manageable $20 billion in 1980 to about $30billion in 1992. The servicing of the debt is as the economy as a whole, highly dependent on oil revenues while the oil industry invariably received much from successive Nigerian government and foreign oil companies received the necessary inventories 5o ensure that their continued presence, the story of oil in Nigeria is one of the missed opportunity administrative disorganization, increase in public expenditure, increasing dependence on oil revenue economy.

1.2   STATEMENT OF PROBLEM

As the leading sector of the economy, the oil industry should have some positive spill over into the other sectors of the economy such as technological transfer forward and backward linkage. The fast growing population rather acquired a taste for a high quality of life and social well being was emphasized at the rest of the economy. This oil industry is virtually an enclave which is integrated more with the economies of Europe, America and France than Nigeria. The Nigerian economy has become dependent on oil revenues over the past decades. During the 1986-92 periods, oil export revenues increased at an average of 13 percent per annum which GDP measure in current US Dollars, decreased by an average in oil export revenues increased at an average in oil export revenues along side that continuing decline of the non-oil economy implies higher dependency. Over the years, the contributions of the oil industry to the growth of Nigeria economy are great. On this premise, the researchers want to appraise the impact of oil industry on the economic development of Nigeria. Using SPDC as a case study.

1.3   PURPOSE OF THE STUDY

The major objective of the study is to determine the impact of oil industry in the development of Nigeria. The objectives include;

1.   To identify precisely the contribution of shell in Nigeria economic development.

2.   To identify the effect of oil revenue on the sector of the economy.

3.   To point out the negative roles of shell and the oil industry.

1.4   SIGNIFICANCE OF THE STUDY

Nigeria oil industry has an interesting element in common with the country’s once celebrates palm oil industry. In view of this, the importance of the first place shows that Nigeria hitherto was an agricultural producing economy. Oil industry in Nigeria today is one of the leading sectors of the economy. It has risen to a position of prominence and has become the pivot of the Nigerian economy since its inception in 1859’s.

1.5   RESEARCH QUESTIONS

The researchers have the following question in mind while carrying out his/her research work.

i.    How effective is the activities of the oil industry in the economic development of Nigeria?

ii.   What are the major problems limiting the efficiency and productivity of the oil industry with regards to the economic development in the Nigeria oil industry?

iii.  What possible measures and strategies could be employs, to enhance the efficiency and productivity of the oil industry for economic development of Nigeria?

1.6   SCOPE/DELIMITATION OF THE STUDY

The research project will be restricted to shell company in order to examine the impact of oil industry on the economic development of Nigeria, we have to limit the scope of the study. The sector in the economy which are influenced by oil revenues will from an integral part of the scope.

1.7   LIMITATION OF THE STUDY

The researcher faced a number of limitations in the course of carrying out this study. The greater identifiable constraints were time, finance or cost and literature materials.

Time factors: Time was the major constraint on the part of the researcher, the researcher had other courses to take alongside seminar and term papers.

Finance: The problem of finance cannot be over emphasized. In this work, the cost of obtaining materials, transportation to SHELL PETROLEUM DEVELOPMENT COMPANY (SPDC) at port-Harcourt, Photostatting the materials, buying stationeries, typing and binding increased the financial constraint of the study.

Literature materials: The relative scarcity of material and the reluctant of the oil companies especially shell to part with information related to the oil industry also contributed to the constraints encountered by the researchers.

Despite this limitation, efforts has been made to provide a reasonable work.

1.8   DEFINITION OF TERMS

The researcher defines the following terms to help for easy understanding of the study. Thus:

Revenue: The Money that is received by government from taxes or that an organization etc receives from business.

Economy: The relationship between production trade and the supply of many in a particular country or region.

Expenditure: An amount of money that is spent on the essence of something.

Mainstay: A person or thing that is most important part of something and enables it to exist or be successful.

Industry: The collection of individual firm to produce similar commodities or the production of goods from raw materials especially in factories.

Oil: Thick liquid that is found in rock under the ground.

Barrels: A large round container usually made of wood or metal with flat ends usually covered sides.

Per capital: For each person.

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