1.1 Background of the Study
Oil was first discovered in Nigeria in 1956 at Oloibiri, Bayelsa state in the Niger Delta by shell-BP after half a century of exploration, and in 1958 Nigeria joined the rank of oil producers when its first oil field came on stream (Azaiki & Shagary 2007). Since then, Oil revenue began to play a prominent role in the Nigerian economy. In resent time oil has been the major source of energy for the households and industries in Nigeria and in the whole world. Oil being the brain box of the Nigerian economy plays a vital role in shaping the economic and political destiny of the country.
The oil industry began to play a prominent role in the economic life of the country at the end of the Nigeria (Fashola (1999). Nigeria is Africa’s highest oil exporter and the world’s tenth largest oil producing country It has realized over US$ 600 billion in oil revenues since 1960, and is currently the 5th highest net oil exporter in the World (CIA The world fact book, 2015). Nigeria’s economy is heavily dependent on natural resources; oil and gas constitutes 98%of total exports, 80% of government revenues and about 20% of GDP (CBN, 2010). In spite of the enormous economic potentials in Nigeria, it has largely failed to live up to the ambitious growth projections that followed the first oil boom in the 1970s (Bawa & Mohammed 2007). According to Anyanwu, et al (1997) Petroleum has transformed poor nations into rich ones, deserts into watersheds and bankrupt nations into creditors. Specifically, with respect to Nigeria, there is no gain saying that the oil sector has undergone tremendous transformation over the years. The industry which was merely the “supportive” economic sector in the 1960’s with agricultural sector as the dominant one turned to be the predominant source of Nigeria’s foreign exchange earnings and most viable access to international investment opportunities in the 80’s and 90’s, no other resources in Nigeria has played such a great role over the national economy as crude oil.
In 1937, an oil prospecting license was granted to shell D’Arcy Exploration parties. The first commercial discovery of crude oil in Nigeria was made in 1956 by shell at Oloibiri. The company started production and in 1961 the Federal government of Nigeria issued ten oil prospecting licenses on the continental shelf to five companies. Each license covered was subject to the payment of N1 million. With this generous concession full-scale on-shore and off –shore oil exploration began.
Oil was found in commercial quantities at Oloibiri in the Niger delta, further discoveries at Afam and Boma established the country as an oil-producing nation. The Nigerian crude oil is described as a sweet type because of its lightness and its low sulphur content. It was largely sought-after in the international oil market. The global perception of Nigeria is that of a really blessed oil producing nation, but with a growing poverty index. (Maaji Umar YAKUB, 2008). The problems of low economic performance of Nigeria cannot be attributed solely to instability of earnings from the oil sector, but as a result of failure by government to utilize productively the earnings from the export of crude oil from the mid 1970s to develop other sectors of the economy. Nigeria is among the poorest countries in the world, with the poverty incidence estimated at 54% in 2006. The economy has been substantially unstable, a consequence of the heavy dependence on oil revenue and the volatility in its prices. The oil boom of the 1970s led to the neglect of non-oil tax revenue, expansion of the public sector, and deterioration in financial discipline and accountability. In turn, oil-dependency exposed Nigeria to oil price volatility which threw the country’s public finance into disarray. This study will examine the relative impact of oil and non-oil export on economic growth in Nigeria.
1.2 STATEMENT OF THE PROBLEM
Since the advent of oil in Nigeria in 1956 by shell the sector has been a major financier or source of Nigeria’s source of export and major source of fund to government. Nigeria has earn approximately $600 billion US dollars, which cannot be compared to the level of economic growth and development in the country, as it is stated in IMF bulletin that an average Nigerian lives less than a dollar per day. This shows the level of hardship that the citizens of a country so endowed with a lot of natural resources are going through. It is on this backdrop that the researcher intend to investigate and analyze the impact of oil revenue and macro economic performance in Nigeria.
1.3 OBJECTIVE OF THE STUDY
The main objective of this study is to analyze oil revenue and macro economic performance in Nigeria. But for the successful completion of the study, the researcher develops the following sub objective:
1. To ascertain the impact of oil revenue in economic development.
2. To ascertain the relationship between oil revenue and macro economic performance.
3. To ascertain the role of oil revenue in economic development.
4. To ascertain the impact of oil revenue in Nigeria economy
1.4 RESEARCH HYPOTHESES
For the successful completion of the study, the following hypotheses were formulated:
H0: There is no significant impact of oil revenue in Nigeria’s economic development
H1: There is a significant impact of oil revenue in the economic development of Nigeria.
H0: There is no significance relationship between oil revenue and macro economic performance.
H2: There is a significant relationship between oil revenue and macro economic performance.
1.5 SIGNIFICANCE OF THE STUDY
It is conceived that at the completion of the study, the findings will be of great use to the national economic planning committee to aid the in assessing the efficacy and efficiency of resources. The study will also be of great importance to bureau of statistics in keeping tab with the trend in the oil sector and its impact on the economy.
It is also perceived that the study will be of great importance to researchers as it will serve as a source of information to researchers who intend to carry out a study on a similar topic.
Finally the findings will be of great importance to academia’s, teachers, students and the general public as the study will add to the pool of knowledge.
1.6 SCOPE AND LIMITATION OF THE STUDY
The scope of the study covers analysis of oil revenue and macro-economic performance in Nigeria, however the researcher encounters some limitation in the cause of the study. Below is some of the limitation that the researchers encounter.
AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
FINANCE: Finance is a major constrain to the scope of these research work, this is because the researcher has to combine academic work and the research work which limit the amount of fund allocated to the studies
1.7 DEFINITION OF TERMS
Macro-economics: Macroeconomics is a branch of the economics field that studies how the aggregate economy behaves. In macroeconomics, a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment.
Revenue: In accounting, revenue is the income that a business has from its normal business activities, usually from the sale of goods and services to customers. Revenue is also referred to as sales or turnover. Some companies receive revenue from interest, royalties, or other fees. Revenue may refer to business income in general, or it may refer to the amount, in a monetary unit, received during a period of time, as in “Last year, Company X had revenue of $42 million”. Profits or net income generally imply total revenue minus total expenses in a given period. In accounting, revenue is often referred to as the “top line” due to its position on the income statement at the very top. This is to be contrasted with the “bottom line” which denotes net income (gross revenues minus total expenses)
1.8 ORGANIZATION OF THE STUDY
This research work is organized in five chapters, for easy understanding, as follows:
Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlight the theoretical framework on which the study its based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and recommendations made of the study.