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OIL EXPORT REVENUE AND ECONOMIC GROWTH IN NIGERIA FROM 1971-2005.
This research work examines empirically the relationship between oil export revenue and economic growth in Nigeria over the period 1971 to 2005. The argument is that oil export is positive associated with economic growth in Nigeria. This is because Nigeria economy is highly dependent on revenue from crude oil export for most of its economic activities. Oil exports contribute significantly to foreign exchange earnings, government revenue and gross domestic product in the economy. Thus, after carrying out empirical analysis it was discovered at oil export revenue is negatively related to economic growth in Nigeria over the period of the study.
TABLE OF CONTENTS
Title Page i
Table of Content vi
1.1 Introduction 1
1.2 Statement of the problem 4
1.3 Objective of the study 6
1.4 Research questions 6
1.5 Hypothesis of study 7
1.6 Method of study 7
1.7 Significance of the study 7
1.8 Scope/limitation of study 9
1.9 Organization of the work 9
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction 10
2.2 Evolution of crude oil industry in Nigeria 10
2.3 The role of crude oil in an economy global view 12
2.4 Crude oil in the Nigeria economy 16
2.5 Economic growth conceptual issues 33
2.6 Theories/models of economic growth 37
2.7 Economic growth performance in Nigeria 46
2.8 Growth performance in Nigeria 52
CHAPTER THREE: METHOD OF STUDY
3.1 Introduction 54
3.2 Sources of data method of analysis 54
3.3 Theoretical consideration the model 55
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1 Introduction 57
4.2 Dependent and independent variables for the study 57
4.3 Data analysis 57
4.4 Test of the hypothesis 63
4.5 Data analysis and results interpretation 64
4.6 Hypothesis test 64
CHAPTER FIVE: DISCUSSION, RECOMMENDATIONS AND CONCLUSION
5.1 Introduction 66
5.2 Discussion 66
5.3 Recommendations 68
5.4 Conclusion 70
5.5 suggestion for further study 70
Oil export revenue has assumed a central role in the economic growth and development of Nigeria and thus its impact on economic growth and development can hardly be over emphasized.
Infact, Iyoha (2005) had it that between 1981 and 1999, Nigeria received over US $ 228 billion from crude oil exportation.
Nigeria was predominantly an agregarain economy before discovery of oil in 1956 and up to the early part of 1970’s thereafter, oil exerted tremendous impact on the economy. Precisely, the share of oil n total export was 2.7 percent in 1960. This increased to 32.4 percent by 1966 and cascaded to 17.5 percent in 1968. By 1971, the year Nigeria joined the Organization of Petroleum Exporting Countries (OPEC), the share of oil in total export skyrocketed to 93.6 percent in 1976, moved up to 96.9 percent in 1981 and declined slightly to 94.9 percent by 1989. By 1996, the share of oil export in total export has risen to an all-time high 98.2 percent, falling slightly to 97.6 percent in 1997 (Oriakhi, 2002).
Thus, from this evidence, it becomes obvious that since 1970s oil export has become the primary source of revenue for the government and its share of export earning remains virtually intact.
In line with this, there are two critical periods to reckon within in the history of oil export in Nigeria. These are the periods of oil boom of 1970s and that of oil glut of 1981 and 1986 respectively. The oil boom period is the period in the world oil market when the price of crude oil quadruped (rose by four times) consequently upon the crises in the Middle East occasioned by the Israel/Arab war of 1973. The oil boom brought about colossal flow of revenues to the Nigerian economy and this snowhalled into misguided expenditures by Nigerian government. It was reported that the then Head of States General Yakubu Gowon, said that the problem of Nigeria was not money, but how to spend it.
The era of oil boom was however short lived by the glut of the 1980s, when there was a drastic fall of oil prices in the world oil market. This is the second critical period in the history of crude oil in Nigeria.
The glut of 1981 was engineered by the advanced nations, especially the United States who used Saudi Arabia as a proxy to flood the international oil market with crude oil. For this purpose, Nigeria that did not use her crude oil revenue judiciously ran into trouble and this problem became polemic. The major implication of the oil glut of the early 1980s was that Nigeria’s foreign exchange was drastically reduced to support the importation of goods and services.
It was against the background of oil glut and the recession in the international economy that the government of Shehu Shagari introduced the first set of austerity measures in the 1980s. This also precipitated the adoption of home browed World Bank/International Monetary Fund Structural Adjustment Programme (SAP) in 1986 by the government of General Ibrahim Babangida. The objective of the SAP was to restructure and diversity the productive base of the economy in order to reduce dependence on the oil sector and on import (Okojie, 2002).
1.2 STATEMENT OF THE PROBLEM
The impact of oil revenue on the Nigerian economy has long been subject of debate among economists and political analysts. While it is generally believed that there have been massive influxes of revenue derived from the oil export since exportation of oil commenced in 1958, some argued that economic growth in Nigeria has not matched with the huge revenue derived from oil export. They argued that the cause of this is a result of embezzlement of funds by those in government. (Okowa, 1995), recognized that, systemic corruption and Abdulistic capitalism is one of the key factors that had led to the setback of economic development in Nigeria.
On the other hand, some analysts are on the view that oil revenue is the ‘Life Wire’ of the Nigerian economy. According to them, every other sectors of the economy in Nigeria depend on oil revenue for sustenance. The revenue, according to them has helped in nation’s building such as construction of roads, providing hospitals, schools, provision of scholarships, bursary allowance etc.
Therefore, the task of this study was to find out why in some areas some people have not been part of the ‘national cake’, whereas, some have felt the impact of the ‘Petrol Naira’. The stud also explained what has led to the recent shortage of the commodity in Nigeria, the consequences and of course the way out of the predicament. The study also make recommendations for the government on how to manage the oil revenue so that it can go round the various sectors of the economy more especially in the Niger Delta Region, in order to address hostages and kidnapping in the region.
1.3 OBJECTIVE OF THE STUDY
The major objective of the study is to examine the impact of oil export revenue on economic growth in Nigeria. Specifically, the study focuses on the following:
i. To examine the performance of oil export in Nigeria
ii. To estimate the relationship between oil revenue and economic growth in Nigeria.
iii. To examine the effect of oil export on the Nigeria economy.
1.4 RESEARCH QUESTIONS
This study was guided by the following research questions.
i. What is the relationship between oil export revenue and Nigeria’s economic growth?
ii. What are the implications of oil export revenue on Nigeria’s economic growth?
iii. How has the dependence on crude oil affected the non-oil sector of the economy?
iv. How can the economic growth of the country be accelerated vis-à-vis export and non-oil export?
1.5 HYPOTHESIS OF STUDY
In this study, the following research hypotheses which are stated in the NULL form were tested:
H01: There is no significant relationship between oil revenue and economic growth.
H02: There is a significant relationship between oil revenue and economic growth.
1.6 METHOD OF STUDY
Secondary data was used for the study. The data were collected from. National Bureau of statistics (NBS), Annual abstract of Statistics, Central Bank of Nigeria’s Statistical Bulletin and Annual Reports and Statement of Accounts.
OLS method of simple regression was used to analyze the data.
1.7 SIGNIFICANCE OF THE STUDY
It is an established fact that oil is the ‘Life Wire’ of the Nigerian economy. Huge amount of foreign earnings is derived from the exportation of the products, yet, Nigeria over the years of high exportation of the product have not achieved balanced macroeconomic objectives like other OPEC members.
In this study, therefore, Nigerians shall be enlightened and informed about how the revenue generated from oil exportation over the years has been mis-managed by corrupt leaders who were in government.
Also, the study focused on the performance of the economy since the exportation of oil began.
The study provides recommendations that both the government and policy makers will find useful in their drive to achieving rapid and sustainable economic growth and development in Nigeria.
Recommendations were also made for the government on how hostage takings, kidnappings, pipeline vanderlization in the Niger Delta Region of Nigeria could be addressed.
1.8 SCOPE/LIMITATION OF STUDY
The constraint of time was a major problem in the course of the work. The reason is that attention had to be given to other course work as required by the programme.
1.9 ORGANIZATION OF THE WORK
The study is organized into five chapters. The first chapter covers the introduction which shows and specifics the basis and framework of the study. The chapter also states the problem of study and hypothesis to be tested. Chapter two is tasked with the review of literature materials that have relevance on the study. Chapter three the method and procedure used for the study is stated. In chapter four, data collected in the process of study were presented and analyzed. Finally, chapter five summarizes, concludes and proffer recommendations for the study.