Nigeria economy is basically an open economy with international transactions constituting an important proportion of her aggregate economic activities. oil export Over the years, the degree of openness of the economy has grown considerably.
Before Nigeria gain her political independence in 1960, agriculture was the dominant sector in the economy, which provides both cash crops and food crops to the economy and accounted for the largest part of the foreign exchange of the country. oil export But, the discovery of crude oil production in commercial quantities changed the structure of the Nigerian economy. oil export This led to the neglect of agricultural product, making the economy to depend oil export heavily on production of crude oil. In 2000, oil and gas export accounted for more than 98% of export and about 83% of federal Government Revenue. (Odularu 2008). Nigeria’s proven oil reserves are estimated to 35billion barrels, Natural gas reserves are 1000 trillion fti (2,800kmi) and its crude oil production was around 2.2million barrels (350,000mi) per day. (Odularu 2008).
Furthermore, the oil and natural gas export generated huge revenue to the government and have a surplus balance of payment over the years. It was reported that 80% of Nigeria’s revenue goes to the government, 16% spent on administrative expenses and 4% go to investors. The huge revenue from oil export only benefit 1% of the population due to corruption in Nigeria. ( Odularu 2008). Mismanagement over the years back hindered economic reforms from achieving its full economic potentials.
However, Nigeria Gross Domestic Product at purchasing power parity became more than doubled from $170.7billion in 2005 to $374.3billion in 2010, with informal sector putting the actual numbers greater than $374billion. The Gross domestic Product per capita doubled from $1,200 per person in 2005 to an estimated $2,500 per person in 2009, with the informal sector included, the Gross Domestic Product per capita was estimated around $3,500 per person. (Nigeria economy). oil export
Furthermore, the united states remains Nigeria’s largest customer for crude oil export accounting for 40% of the country total oil exports, providing about 10% of overall united state oil imports and ranked as the fifty-largest source for united state imported oil.oil export(Odularu 2008). oil export
1.1 STATEMENT OF THE PROBLEM.
Owing to both external and internal factors, the growth performance of the Nigeria economy has been less than satisfactorily during the past three decades.oil export Since the first oil price shock of 1974, oil has annually produced over 90% of Nigeria’s export income from 1970 to 1999,oil export oil generated almost $231 billion in rents for the Nigeria economy and these rents have constituted between 21% and 48% of Gross Domestic Product, but yet these rents have failed to raise Nigeria incomes and done little to reduced poverty. oil export Since 1970, Nigeria’s per capita income has fallen by about 4% in constant dollars.
Also, since early 1970, the government has annually received over half of its revenues from oil sectors which are about 85%. These oil revenues are not only large but highly volatile and causing the size of government programs to fluctuate accordingly. oil export From 1972 to 1975, government spending rose from 8.4% to 22.6% of GDP, by 1978, it dropped back to 14.2% of the economy.This fluctuation has made the government unable to adhere to wise fiscal policies during the 1970s and 1980s, when oil prices fluctuated sharply, the ability of these governments to spend their funds wisely, and limit corruption has been low.
Although large proceeds are obtained from the domestic sales and export of petroleum products, its effect on the growth of the Nigeria economy as regards returns and productivity is still questionable.