The Impact Of Oil Industry On The Economic Development Of Nigeria (A Case Study Of Nigeria National Petroleum Corporation (NNPC))
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.
BACKGROUND OF THE STUDY:
Oil is said to be a mixture of organic chemical dewed mainly from the remains of microscopic plants and animals that lived in seas, millions of years ago; special condition and great length of time were needed for these remains to undergo complex chemical changes to form oil. These are sometimes concentrated in accumulations which man can not detects and exploit.
Anyaele J.U. (1987) stated that the history of oil industry in Nigeria is as old as the country itself. Oil exploration in Nigeria dated back to 1908 with the appearance of oil at Araromi in the present Ondo State. A German company Nigerian- Butman Corporation started this pioneering effort that was short-lived as a result of the outbreak of the 1914 to 1918 First World War. Another exploratory activity took off in 1937 by an Angola Dutch consortium that served as a forerunner of the present day shell petroleum Development Company of Nigeria Limited shell D’arcy. The exploratory activity started in 1937 after shell D’Arcy had been awarded the sole concession rights that covered the whole territory of Nigeria. The company operated under the mineral oil ordinance of No 17of 1914 and its amendments of 1925 and 1950 which allowed only companies registered in Britain or any of its protectorate the right to prospect for oil in Nigeria and further provided that the principle officers of such companies must be British subject.
The 1939-45 second world war interrupted the exploratory activities of shell D’Arcy. The shell BP under took the preminary geological reconnaissance and intensified its geographical survey in the 1946-51 period. It drilled its first wildcat well in 1951 which later dried up. Shell BP discovered its first commercial crude oil in the country in 1956 at Oloibiri in the present Rivers State. That discovery ushered Nigeria into the international oil arena. Two years later (1958) shell started oil exportation from Oloibiri fold at a rate of 5,100 barrels per day.
In order to increase the price of oil exploration and to ensure that the country was not dependent on one oil company or nation, shell sole concession right over the country was reviewed and exploration rights were granted to companies like Mobil, Gulf, Agip, Safrap (ELF) Tenneco, and Amossea (Texaco/chevron) were allowed to join the explorers for oil in the Onshore and offshore area of Nigeria.
According to Onoh J.K (1995), when Nigeria gained independence in 1960, oil production had been established in the country an it was exporting over 170,000 barrels per day. It was Gluf oil company that struck off shore oil on the Okan structure of the then Bendel state (now, Edo state) in 1964. The licenses that were granted these companies were both offshore and onshore. With these commercial discoveries in petroleum products, the socio-economic and political development of Nigeria began to crystallize as well as its internal dynamics ethnicity.
All crude oil produce before the mid sixties was exported because of no-availability of local refineries, while domestic demand of petroleum products was met by imports. However the need to conserve foreign exchange creates job opportunities to some extent and other benefits derivable from setting up refineries locally prompted the government of Nigeria to establish and commission a refinery in Port-Harcourt in 1965. The refinery has processing capacity 35,000 barrels per day to meet the increasing domestic demand while excess fuel oil was exported.
Michael Tanzer (1980) states that the demand for oil products continued to outstrip supply which made the government to officially open the Warri refinery in 1978 with a total capacity of 100,000 barrel per day, thereby giving the country its present day potential capacity of 260,000 barrels per day. These were designed to refine 50 percent Nigerian light crude and 50 percent medium crude. Expansion work is currently going on at both the Kaduna and Warri refineries, with a fourth refinery being constructed near port-Harcourt at a cost of about N750 million. It is hoped that when the fourth refinery is completed, it will increase domestic refinery capacity by 150,000 barrels per day, and render unnecessary our offshore processing arrangement by which Nigerian crude is taken abroad for refining and the products are imported to meet the short fall in domestic requirements. As the output from all the refineries will then exceed demand, there will be a surplus available for export.
Furthermore, despite the stupendous positive contribution of the petroleum to the Nigeria economy, it equally has negative effect.
According to Yeri Obidake (1982) Nigeria over independent on oil made our economic fortune to be tied to the vagaries of global oil polities and the global oil glut caused us economic instability, political instability etc. the frequent coups, counter coups, change of government and even the civil war that occurred in Nigeria had oil undertone. The evolution in the structure of production shows that the share of agriculture in GNP has declined to 37 percent in 1991 from 41 percent in 1986, despite the introduction of the structural adjustment program me (SAP) which emphasized the need to re-establish agriculture as a growth sector. The external debt has consequently increased from manageable $20 billion in 1980 to about $30 billion in 1992, and the management of this debt is as the economy as a whole, due to highly dependent on oil revenues. The story of oil in Nigeria is on of missed opportunities, administrative disorganization, increases in public expenditure, increasing dependence on oil revenues.
Statement of the Problem:
As the leading sector of the economy, the oil industry should have some spill over into the other sectors of the economy such as technological transfer forward and background linkage.
This oil industry is virtually an enclave which is integrated more with the economic of Europe, American and France than Nigerian. The Nigerian economy has become dependent oil revenues over the past decades. During the 1986-92 periods, oil export revenues increseased at an average of 13 percent per annum which GDP measure in current US Dollars, decrease by an average while oil export revenues alongside the 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 promise, the researchers want to appraise the impact of oil industry on the Economic development of Nigeria. Using NNPC as a case study.
purpose of the Study:
The major objective of the study is to determine the impact of oil industry in the development of Nigeria. To do this, the following area will be concentrated on:
To identify precisely the contribution of NNPC in Nigeria economic development.
To identify the effect of oil revenue on the sector of the economy.
To point out the negative roles of NNPC and the oil industry.
significance of the study:
Nigeria oil industry has an interested element in common with the country’s once celebrated 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.
The researchers have the following questions in mind while carrying out their research work.
How effective is the activities of oil industry in the economic development of Nigeria?
What are the major problems limiting the efficiency and productivity of oil industry with regards to the economic development in the Nigeria oil industry?
What possible measures and strategies could be employed to enhance the efficiency and productivity of the oil industry for economic development of Nigeria?
scope of the Study:
The research project will be restricted to NNPC Company in other 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 revenue will form an integral part of the scope.
Definition of Terms:
The researchers define the following terms to help for easy understanding of the study. Thus:
Revenue: the total income that accurse to the government of a country from various sources, i.e. the money that is received by government from taxes paid by oil companies, organization or firms.
Economy: the relationship between production, trade and supply of money in a particular country or region.
Expenditure: total expenses incurred by public authorities at federal, state and local government levels.
Mainstay: a person or things (like oil) 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 and covered side which is used by the oil companies in measuring oil.
Off shore: drilling happening or existing in sea, not far from the land.
On-shore: drilling existing on land rather than at sea.